Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6685.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6685.
The AUD/USD pair continued its downward trend as investors embraced a risk-on sentiment amid jitters about the artificial intelligence (AI) industry. It retreated to the psychological point at 0.6600, down from the year-to-date high of 0.6705.
Risk-Off Sentiment Has Prevailed
The AUD/USD pair pulled back as jitters surrounding the AI industry continued. Data shows that the tech-heavy Nasdaq 100 Index tumbled by over 1% on Wednesday, continuing a trend that started last week when Broadcom and Oracle released their quarterly results.
The index dropped by 1.93% to $24,647, while the Dow Jones and S&P 500 indices suffered similar declines. This decline is also happening as some investors start booking profits after the indices jumped this year.
The dollar normally jumps when investors have embraced a risk-off sentiment because it is often seen as a safe-haven asset.
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Looking ahead, the US will publish some important macro data that will help traders position themselves for the next Fed actions. The first notable catalyst will be the upcoming US inflation report.
Economists expect the report to show that the headline and core inflation remained above 3% in November. The hope, however, is that the impact of tariffs on inflation will start slowing down over time. Also, there are signs that the falling energy prices will have a positive impact on inflation in the near term.
The AUD/USD pair also declined even as odds of a Reserve Bank of Australia (RBA) interest rate hike rose. A report released earlier today showed that the country’s consumer inflation expectations rose to 4.7% this month, much higher than the bank’s target of between 2% and 3%.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair retreated from a high of 0.6685 this month to the current 0.6600. It has dropped below the important support level at 0.6617, its highest point on October 29.
The pair has moved slightly above the 50-day and 100-day moving average, while the Awesome Oscillator has remained above the zero line.
Therefore, these indicators mean that the uptrend is still intact because of the potential divergence between the RBA and the Federal Reserve. As such, there is a likelihood that it will rise to the resistance level at 0.6700.
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