Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.5860.
- Add a stop-loss at 0.6270.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6165 and a take-profit at 0.6250.
- Add a stop-loss at 0.6100.
The AUD/USD exchange rate’s sell-off continued as American and Australian government bond yields continued rising. The Aussie dropped to a low of 0.6140, its lowest level since April 2020 as most emerging and developed country currencies fell against the US dollar.
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US and Australia bond yields are rising
The AUD/USD pair rose as the yield of Australia’s government bonds rose to 5.10%, its highest level since October 2023. Similarly, the ten-year rose to 4.63%, while the five-year jumped to 4.20%.
The same trend happened in the United States where the ten-year yield rose to 4.78%, while the 30-year jumped to 4.97% as it continued to flirt with 5%.
These yields rose ahead of important economic numbers from the United States and Australia. The US will publish the December inflation report on Wednesday, setting the tone for what to expect later this year.
Economists expect these numbers to reveal that the headline Consumer Price Index (CPI) rose to 2.9% in December from 2.7% a month earlier. They expect the core CPI to remain at 3.3%, much higher than the Fed’s target of 2.0%.
A sign that inflation continued rising means that the Federal Reserve will maintain a hawkish tone this year. Economists expect such a report to signal two interest rate cuts this year, with the first cut coming in July.
US inflation may remain higher for longer because of Donald Trump’s policies on tariffs and migration. The ongoing fires in Los Angeles, California, will also impact inflation as insurance and housing costs jump.
The AUD/USD pair will also react to Thursday's Australian jobs numbers. These numbers will likely justify the Reserve Bank of Australia’s view to start cutting rates in the first quarter.
AUD/USD technical analysis
The daily chart shows that the AUD/USD exchange rate continued its strong decline this week. It dropped to a multi-year low of 0.6150, which coincided with the strong, pivot, release point of the Murrey Math Lines tool. The pair has moved below the 50-day and 25-day Exponential Moving Averages.
Also, the Awesome Oscillator has remained below the zero line since October 9. The Relative Strength Index (RSI) has continued falling and has just moved to the oversold level.
Therefore, the pair will likely continue falling as bears target the next key support at 0.5860, the ultimate support of the Murrey Math Lines.
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