AUD/USD Forecast: Increased pressure on the Australian Dollar

AUD/USD Current Price: 0.6665

• Risk-off flows at the beginning of the day weighed on the Australian Dollar.
• The RBA Meeting Minutes showed that policymakers considered pausing hikes.
• AUD/USD at risk of falling further despite the broad US Dollar’s weakness.

The AUD/USD pair fell to a fresh December low of 0.6628 on Tuesday, ending the day in the red at around 0.6660. The Australian Dollar started the day with a firm footing, rising against its American rival to 0.6743, but quickly changed course and dived to the aforementioned low. Nose-diving Asian stock markets weighed on the pair, despite a broad US Dollar’s sell-off triggered by a resurgent JPY. The latter advanced following the Bank of Japan (BoJ) monetary policy decision, as policymakers introduced a minor twist to their monetary policy while repeating they would keep the ultra-loose stance. Still, the market read it as a soon-to-come shift in the most lagging central bank.

Earlier in the day, the Reserve Bank of Australia (RBA) published the Minutes of its December monetary policy meeting. The document showed that policymakers considered leaving rates unchanged, but uncertainty related to the outlook for inflation and the labour market skewed the scale into a hike’s favor. The pair bounced modestly during US trading hours amid the better performance of US indexes, maintaining the green while heading into the close.

On Wednesday, Australia will publish the November Westpac Leading Index, previously at -0.05%, while attention in the US will be on December CB Consumer Confidence.

AUDUSD short-term technical outlook

The daily chart for the AUD/USD pair shows that the risk of a downward extension has increased. The pair trades around its 100 SMA while meeting sellers at around a flat 20 SMA, currently acting as dynamic resistance at around 0.6740. The 200 SMA, in the meantime, maintains its bearish slope far above the current level. Finally, the Momentum indicator gains bearish traction below its 100 line while the RSI indicator grinds lower at around 47.

The near-term picture offers a neutral-to-bearish stance. The pair is trading below all of its moving averages, with the 20 SMA accelerating its decline below the 100 SMA and about to cross below the 200 SMA. Technical indicators, in the meantime, remain flat, with the Momentum around its midline and the RSI at 41. Further declines should be expected should the pair pierce the 0.6630 support level.

Support levels:  0.6630 0.6595 0.6560

Resistance levels: 0.6690 0.6740 0.6775

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