Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6400.
The AUD/USD exchange rate has remained in a narrow range at a crucial support level after the Reserve Bank of Australia (RBA) left interest rates unchanged. It was trading at 0.6500, down from the year-to-date high of 0.6700.
The AUD/USD pair reacted to last week’s RBA interest rate decision, in which officials left it unchanged at 3.6%. It is concerned about the country’s inflation, which has remained stubbornly above the 2% target.
The most recent data showed that Australia’s headline, trimmed, and weighted consumer inflation rose in the third quarter. As such, cutting interest rates will likely fuel more inflation in the coming months.
The next key catalyst for the AUD/USD exchange rate will be Thursday's jobs numbers. Economists expect the report to show that the headline economy created 14.5k jobs in October after creating 14.9k in the previous month. The unemployment rate is expected to move from 4.5% to 4.6%.
While the labor market is important, its impact on the RBA will be muted as the bank is now focusing on inflation.
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The other catalyst for the pair will be any development on the ongoing government shutdown. There are some signs that the shutdown will end soon, which will provide relief for the economy. For one, it will lead to the release of crucial macro data like the jobs numbers.
Meanwhile, the pair will react to some notable statements from key Fed officials like John Williams of New York and Anna Paulson of Philadelphia. Other Fed officials, like Raphael Bostic and Stephen Moran, who will provide more hints on what to expect.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair has remained on edge in the past few months. It has dropped from a high of 0.6700 to the current 0.6495.
The pair has moved below the 50-day Exponential Moving Average (EMA). It has also remained below the Supertrend indicator, a sign that bears are in control.
The pair has also formed a head-and-shoulders pattern and is now sitting at the neckline. Also, the True Strength Index (TSI) has moved below the zero line.
Therefore, the AUD/USD pair will likely have a strong bearish breakout, potentially to the psychological point at 0.6400. A move above the resistance at 0.6536 will invalidate the bearish outlook.
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