Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6445.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.6400 and a take-profit at 0.6500.
- Add a stop-loss at 0.6300.
The AUD/USD exchange rate plunged to its lowest level in almost three months as concerns about the global economy continued. It slipped to a low of 0.6375, down 7.95% from its highest level this year.
Global Economy Concerns
The AUD/USD pair continued its downtrend after the recent Donald Trump election raised concerns about the global economy.
These concerns have led to a retreat in most commodity prices. Iron ore, a key Australian export, retreated to $106.30 from last month’s high of near $109. Other commodities like copper and crude oil have also retreated in the past few days.
The Australian economy often does well when commodity prices are rising because it is highly dependent on exports.
There are concerns that Donald Trump’s tariffs will have an impact on the global economy, especially China. Trump has pledged to impose tariffs as high as 60% on Chinese goods, a move that will lead to volatility in the global economy.
The AUD/USD pair also retreated after the US released modestly strong jobs numbers on Friday. The data revealed that the economy created over 227k jobs last month, a big rebound from the 30k it added a month earlier. Wage growth also remained healthy, with the average earnings rising by 4%.
These numbers pushed the US dollar index (DXY) higher to $105.73 and the short and longer-term bond yields higher. Analysts expect that the Fed will leave interest rates unchanged in the next meeting.
The next important AUD/USD news will be the US inflation data and the Australian jobs report. In the US, analysts expect the data to show that inflation cooled slightly in November.
Thursday’s report from Australia is expected to show that the economy created over 20k jobs, while the unemployment rate remained at 4.1%.
AUD/USD Technical Analysis
The AUD/USD exchange rate has been in a strong downward trend in the past few months as the US dollar rally intensified. It recently formed a death cross as the 50-day and 200-day moving averages crossed each other.
The MACD indicator has remained below the zero line, while the Relative Strength Index (RSI) is nearing the oversold level. It has also dropped below the key support at 0.6443, its lowest point on November 14.
Therefore, the pair will likely continue falling as sellers target the next key support at 0.6300. The stop-loss of this trade will be at 0.6445.
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