Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6250.
- Timeline: 1-2 days.
Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6250.
- Add a stop-loss at 0.6450.
The AUD/USD exchange rate continued its strong downward trend, reaching a low of 0.6340, its lowest level since November 2023. It is in its third consecutive week of losses as the US dollar index rally continued.
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The AUD/USD pair has fallen as investors turn their focus to the upcoming Federal Reserve decision and its potential divergence with the Reserve Bank of Australia (RBA).
The RBA left interest rates unchanged at 4.35% last week as it has done throughout the year. It maintained its view that inflation was still too high. However, for the second meeting in a low, the bank hinted that it would start cutting interest rates soon. Analysts now expect it to start doing that in its February meeting.
The next key news to watch today will be the Federal Reserve interest rate decision. In it, the bank is expected to deliver another 0.25% rate cut, bringing the year-to-date cuts to 1%. The bank will then have a hawkish tilt and maintain its data dependence.
It is mostly concerned with the upcoming administration, which has proposed several inflationary policies like deportations and tariffs. As such, it believes that more cuts will lead to high inflation in the coming months. Besides, recent data showed that the headline CPI rose from 2.4% in October to 2.7% in November.
AUD/USD Technical Analysis
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The AUD/USD pair has been in a strong downtrend in the past few months. It has moved to the lower side of the Bollinger Bands, a sign that bears are in control for now. The pair has also moved below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has pointed downwards and formed a symmetrical triangle.
Notably, the pair has formed a falling wedge chart pattern. This pattern is drawn by connecting the lower lows since October 29 and the higher highs since November. In most periods, this pattern often leads to a strong bullish breakout when the two lines near their confluence.
Therefore, there is a likelihood that the pair will have a strong bullish breakout in the next few days. If this happens, it will likely rebound and moves to the next point at 0.6445, the middle line of the Bollinger Bands.
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