Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6480.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.6600 and a take-profit at 0.6700.
- Add a stop-loss at 0.6480.
The AUD/USD exchange rate pair continued falling as the US dollar as the US dollar index (DXY) rebounded by over 60 basis points. It crashed to 0.6570 on Tuesday, down from last week’s high of 0.6688. It has fallen by over 5.4% from its highest point this year.
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The AUD to USD pair’s sell-off gained steam as the US dollar index jumped by over 0.5% to $105.45, up from the year-to-date low of $100. This dollar rally happened as investors moved to safe havens after Donald Trump’s victory last week.
He has continued to form his government, naming his border czar and the ambassador to the United Nations. Analysts believe that some of his policies will be highly inflationary, pushing the Federal Reserve to maintain a more hawkish tone.
As a result, the ten-year government bond yield rose to 4.38%, while the 30-year and 5-year moving to 4.47% and 4.20%, respectively.
Looking ahead, the next data to watch will be the upcoming US inflation data on Wednesday and Australia’s wage price index on Wednesday and jobs data on Thursday.
Australia’s jobs numbers will help to determine what to expect from the Reserve Bank of Australia (RBA) in the next meetings.
AUD/USD Technical Analysis
The AUD/USD pair has been in a strong bearish trend in the past few days. It has dropped from the year-to-date high of 0.6943 to 0.6570. The pair has also moved below the key support at 0.6622, its lowest swing on September 11.
It has moved slightly below the 61.8% Fibonacci Retracement level. At the same time, the Money Flow Index (MFI) has moved to the oversold level of 20. Also, the MACD indicator has dropped below the zero line.
The pair has also remained slightly above the ascending trendline, which connects the lowest point on October 30.
Therefore, the AUD to USD exchange rate will likely have a strong bearish breakout in the coming days. If this happens, the next point to watch will be at 0.6477, the 78.6% Fibonacci Retracement level, which is about 1.40% below the current level.
On the flip side, a move above the crucial resistance level at 0.6622 will invalidate the bearish sign. If this happens, the pair will retest the key psychological level at 0.6700, its highest swing on November 7.
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