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AUD/USD Signal: Aussie Pressured Amid Fed and RBA Diverge – 17 October 2022

Bearish view

Sell the AUD/USD pair and set a take-profit at 0.6100.Add a stop-loss at 0.6300.Timeline: 1-2 days.

Bullish view

Set a buy-stop at 0.6250 and a take-profit at 0.6350.Add a stop-loss at 0.6150.

The AUD/USD price came under intense selling as commodity prices slumped and the US dollar edged higher after the latest American inflation data. It was trading at 0.6200 on Monday morning, which was slightly higher than this month’s low of 0.6176.

US dollar gains momentum

The AUD/USD price continued with its bearish trend mostly due to the strong US dollar. After pulling back earlier last week, the US dollar index surged to $113.17, which was slightly below this year’s high of $115.

The US dollar’s strength continued after the latest American inflation data and the Fed minutes. Minutes published on Wednesday revealed that most Fed officials believe that there us an urgent need to continue tightening. They fear that high inflation will get entrenched in the economy for a long time.

Therefore, analysts expect that the Fed will continue tightening in the coming months. It is expected to hike by another 75 basis points and continue with its quantitative tightening (QT) process. It will then hike by another 50 basis points in its December meeting.

This view is a divergence from what the Reserve Bank of Australia (RBA) has adopted. Early this month, the RBA decided to hike interest rates by just 0.25%, which was lower than the median estimate of 0,50%. The bank is concerned about a situation where it hikes too fast and put the economy at risk. Australia’s bond yields have continued rising, with the 10-year sitting at above 4%.

Meanwhile, commodity prices have continued falling. The Bloomberg Commodity Index (BCOM) crashed by more than 2% and is sitting at the lowest level since October 2.

The next catalyst for the AUD/USD pair will be the upcoming Australian jobs data scheduled for Thursday this week. These numbers are expected to show that the economy continued adding jobs in September as the unemployment rate remained at 3.5%.

AUD/USD forecast

The four-hour chart shows that the AUD/USD price has been in a strong bearish trend in the past few days. This pair moved below the important resistance level at 0.6364, which was the lowest level on September 28.

The pair has crashed below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved below the neutral point at 50. Similarly, the pair is slightly below the supertrend indicator. Therefore, the pair will likely continue falling as sellers target the key support level at 0.6100.

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