AUD/USD Targets Critical Tech Levels After its Best Week in Over 2 Years

  • AUDUSD
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AUD/USD Analysis

Last week's inflation report from the US, showed that headline CPI moderated to +7.7% in October to the lowest level since January, while the Core reading also eased to +6.3%. This sparked a dovish repricing in market expectations around the Fed's tightening path, which sent the USDOLLAR lower.

This helped AUD/USD into its fourth straight profitable week and the best since March 2020, in a noteworthy recovery from its last month's two-year lows. Medium-term bias has now shifted to the upside and bulls now try to take-out the key 0.6740-50 resistance. This comprises of the 38.2% Fibonacci of the 2022 High/Low drop and the descending trend line from that high.

Successful effort will turn it towards the 200Days EMA and the 50% Fibonacci in the 0.6870-0.6971 region, although further advance to these levels and beyond may prove elusive.

However, the Relative Strength Index (RSI) hit the most overbought levels since at least August, which had then sparked a slump to this year's lows. AUD/USD is already showing some indecision today, ahead of the critical 38.2% Fibonacci. Below it, the broader downturn stays intact and the pair remains vulnerable to the EMA200 under 0.6500. Daily closes below it, will bring the November lows into the spotlight (0.6271), but they seem distant at this stage.

Furthermore, market hopes for a Fed pivot have been disappointed before, while the policy differential with its Australian counterpart remains unfavorable for the pair. The US central bank may have hinted at a slower pace of rate hikes at some point, but ruled out any pivot and pointed towards a higher terminal rate than previously expected. [1]

The Australian Reserve Bank (RBA) on the other hand, has already taken a step back. Earlier in the month, policy makers raised rates by just 25 basis points, the second straight move of this size, in a dovish shift from a series of beefier 0.5% moves. [2]

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 14 Nov 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20221102.htm

2

Retrieved 30 Nov 2022 https://www.rba.gov.au/media-releases/2022/mr-22-36.html

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