Strong support at 0.648 holds AUDUSD drawdown in check

The AUDUSD currency pair started the week with strong downward momentum, returning to the 0.648 level. This support has successfully repelled several bearish attacks over a month, with all subsequent drawdowns being bought back in no time. A test of the 0.648 threshold could lead to another rebound, with quotes heading towards the 0.653 level and last week's highs. However, this is not the only opportunity for traders to buy the pair at a favorable price.

The technical picture suggests that AUDUSD’s decline may not be over. Both the RSI and the Stochastic Oscillator are steadily heading toward oversold territory, but they have not reached it yet, nor have they shown signs of an upward reversal. Long positions could be opened at the current level, or traders might wait for a deeper correction toward 0.645 for an even more favorable entry point. As long as quotes hold above 0.642, this scenario remains valid.

There is nothing extraordinary in the current strengthening of the US dollar against its Australian counterpart. The greenback’s advance is underpinned by increasing concerns regarding the Federal Reserve’s (Fed) future monetary path. Yesterday’s comments from policymakers did not shed any light on the situation. Christopher Waller openly supported a 0.25% rate cut in December, while Philip Jefferson urged caution. Uncertainty will remain until the publication of economic statistics, which has been delayed due to the US government shutdown.

Anyway, the Aussie has solid support, so a sudden drop against the US currency seems unlikely. The minutes of the Reserve Bank of Australia (RBA) meeting on November 4, released today, showed that officials no longer consider the country's monetary policy to be extremely restrictive. The latest labor market statistics and the Consumer Confidence Index (CCI) came in above forecasts, while inflation is slowing its decline. As a result, the RBA will either continue to hold policy steady or conclude the cycle of rate cuts at the current level of 3.6%.

Consider the following trading strategy:

Buy AUDUSD in the 0.645–0.648 range. Take profit: 0.653. Stop loss: 0.642.