Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6590.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.6500 and a take-profit at 0.6600.
- Add a stop-loss at 0.6400.
The AUD/USD pair pulled back in the overnight session as the US dollar index (DXY) and government bond yields jumped. The pair retreated to the important support at 0.6500, erasing some of the gains made earlier this week.
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This price action happened as concerns about the impact of Donald Trump’s policies on the economy continued. Trump, the incoming president, has warned that he will implement some major policies that could impact the American and Australian economies.
In the US, he has hinted that he will deport millions of illegal aliens by using ICE and the millitary to do that. Such a a strategy would be inflationary because these migrants are employed in key industries like construction, agriculture, and hospitality.
Trump has also pledged to implement large tariffs on imported goods from most countries, including Australia and China. A trade war would have a big impact on the global economy.
The AUD/USD pair retreated as the US dollar index rose by 0.45% to $106.62. Similarly, the 10-year and 30-year bond yields rose to 4.41% and 4.60%, respectively.
The Australian bond yield also rose slightly to 4.58%, up from 4.51%, its lowest point on November 19.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate has been in a strong downward trend in the past few months. After attempting to rebound this week, the pair found strong resistance at 0.6530, the bottom of trading range of the Murrey Math Lines.
The pair has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages crossed each other. It has also dropped below the support at 0.6625, its lowest point on September 11.
The Money Flow Index has moved slightly above the oversold level of 20. Similarly, the MACD indicator has moved below the zero line. Therefore, the pair will likely continue falling as sellers target the next key point at 0.6347 the ultimate support of the Murrey Math Lines. This view will be confirmed if the pair drops below the key support at 0.6443, its lowest point last Friday.
On the flip side, a move above this week’s high of 0.6530 will invalidate the bearish view. If this happens the pair will likely bounce back and retest the point at 0.6625.
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