AUD/USD Forecast: Bearish correction with further potential for continuation

Matías Salord FXStreet

AUD/USD Current Price: 0.6832

US Dollar Index rebounds from monthly lows, rises above 101.00.
Higher Treasury yields boost the Dollar's rebound.
The bullish momentum in AUD/USD is fading, but the overall trend is still upward.

The AUD/USD hit a fresh five-month high at 0.6871 but lost momentum. During the American session, the pair turned negative, falling below 0.6850 amid a recovery of the US Dollar, which was boosted by higher Treasury yields.

Market participants largely ignored the US data releases on Thursday, which showed an increase in Initial Jobless Claims above expectations to 218,000 in the week ended December 23. Another report indicated that Pending Home Sales remained flat in November instead of the expected 1% increase.

On Friday, no data is scheduled from Australia, while the Chicago PMI will be released in the US. Attention is now focused on next week's US employment data, which includes ADP, JOLTS, jobless claims, and Nonfarm payrolls.

The US Dollar dynamics continue to be the critical driver in AUD/USD. However, current market conditions with low volume could trigger unexpected moves without catalysts. Given these circumstances and wider spreads, there may be reduced incentives to trade towards the end of 2023.

AUD/USD short-term technical outlook

The AUD/USD is trading around the upper limit of an ascending channel, holding a bullish bias but correcting. The pair is about to post its second consecutive monthly gain. On the monthly chart, it has risen above the 20-Simple Moving Average (SMA) for the first time since March 2022, which is a positive sign for the first half of 2024.

Ahead of the Asian session, the 4-hour chart shows that the price is still above the 20-SMA and near the relevant support area at 0.6830. Technical indicators favor further downside, with the Relative Strength Index (RSI) moving south and the MACD showing bearish signs. A break below 0.6830 would open the doors to a deeper correction. If AUD/USD holds above 0.6830, it could continue to consolidate between that level and 0.6865.

Support levels: 0.6830 0.6795 0.6750

Resistance levels: 0.6855 0.6870 0.6905

View Live Chart for the AUD/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

AUD/USD looks offered just above 0.7100

AUD/USD has extended Monday’s pessimism, briefly breaching below the key. 0.7100 contention zone to hit three-day lows. The firmer tone in the Greenback has been keeping the Aussie under pressure while investors continued to gear up for the upcoming Trump-Xi Summit on Thursday.

USD/JPY holds small gains near 157.50 as JPY intervention risks loom

USD/JPY posts modest gains while trading near 157.50 in the Asian session on Tuesday as intervention fears help limit losses for the Japanese Yen. However, the BoJ's dovish rate hike to a 31-year high keeps JPY bulls on the back foot. Meanwhile, the US Dollar retains a bullish undertone amid the Fed's hawkish outlook and escalating Middle East tensions, providing tailwinds for the pair.

Gold makes a U-turn; focus shifts to $4,400

Gold regains balance and now trades with decent gains, approaching the key $4,400 mark per troy ounce on Tuesday. The yellow metal’s advance comes despite the resumption of the buying interest in the US Dollar, mixed US Treasury yields and geopolitical uncertainty.

XRP retains bullish outlook despite paring gains above $1.50

Ripple (XRP) trades elevated above $1.52 on Tuesday despite experiencing a minor correction from the previous day’s high of $1.57. XRP framed the uptrend last week, rising alongside the broader bullish cryptocurrency market.

Trump meets Xi: Why markets are watching this summit so closely

United States (US) President Donald Trump and Chinese President Xi Jinping are set to meet in Washington on Thursday for a summit closely watched by markets. After several months of easing trade tensions between the US and China, the meeting could determine whether the world's two largest economies extend their truce or enter a new period of uncertainty.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.