The AUDUSD pair has been in an upward trend since mid-October, and by now it gained 11% in total. Local corrections regularly occur, but still every next low and high turns out to be higher than previous ones, thus indicating a steady upward trend. At the moment, another correcting decline is happening, which might easily be continued without having to break the growing trend.
The start of the AUDUSD decline was given on Friday, after the release of the U.S. jobs report for November. And although the pace of job gains was the lowest since April 2021, market cooling is still not as active as the Fed would like it to be. So, average wage growth accelerated and rose from 4.9% to 5.1%, and this exact indicator is the most sustainable for determination of inflation level.
While the jobs report and the latest PMI data haven’t significantly affected expectations regarding a rate increase by 0.5% at the upcoming Fed meeting on December 14, these factors have clearly impacted the estimations of market participants concerning monetary policy for the next year, making them more pessimistic. Besides a forecasted peak of tightening at about 5% that would raise rate levels in all other major economies, the dollar’s status as a safe haven currency will also provide some support for the greenback.
The Australian national currency doesn’t have such a support, and that’s why it is now in a weak position. Although it showed a notable growth in October and November, this strengthening was part of a general tendency in the currency market, and it might be difficult for the Australian dollar to find its own growth factors.
Meanwhile, Australian economy is slowing down, thus making the Reserve Bank highly cautious in its further actions. So, the dollar remains more active in the AUDUSD pair, and it has good chances to win back recent losses in an anticipation of the inflation report release and the Fed meeting scheduled next week.
After three days of the AUDUSD decline, a rebound just above 0,67 is now visible. After that, a renewal of correction is possible.
The following trading strategy might be offered:
Sell AUDUSD below 0.67. Take profit 1 – 0,664. Take profit 2 – 0,66. Stop loss – 0,674.
Traders might also use Trailing stop instead of the fixed Stop loss at their own will.