AUD/USD Forecast: Some consolidation likely before another leg higher

Matías Salord FXStreet

AUD/USD Current Price: 0.6639

The US Dollar tumbles as US Treasury yields slide further.
Australia will release October consumer inflation data early on Wednesday.
The AUD/USD remains bullish, although technical indicators show overbought readings.

The AUD/USD rose to 0.6665, reaching the highest level in three months, and then pulled back, finding support above 0.6630. The weaker US Dollar was the key driver behind the move. The focus now shifts to Australian inflation data.

Data released on Tuesday showed that retail sales in Australia dropped 0.2% in October, against expectations of a 0.1% increase. The annual rate slowed from 2% to 1.2%, the lowest since August 2021. Reserve Bank of Australia (RBA) Governor Michele Bullock warned that services inflation is sticky and that they have seen more modest price pressures than expected. Markets do not anticipate another hike at the next meetings.

Key information is due on Wednesday with the release of the Monthly Consumer Price Indexes. The annual rate is expected to decline from 5.6% to 5.2%. Also relevant will be the Reserve Bank of New Zealand's decision.

On Tuesday, the US Dollar retreated, exacerbating its current negative momentum after comments from Federal Reserve (Fed) Governor Christopher Waller, who stated that there is no reason to insist that interest rates need to remain high if inflation consistently declines. He was speaking about the future. A few minutes later, Fed's Michelle Bowman said she remains willing to support more rate hikes if progress on inflation stalls. On Wednesday, the US will report a new reading on Q3 growth, and the Fed will release the Beige Book.

Despite the numbers and comments, the US Dollar remains under pressure and is boosting the AUD/USD pair. The trend still prevails and could continue as long as Treasury yields keep moving lower and the market narrative points to the Fed being done raising rates.

AUD/USD short-term technical outlook

The daily chart shows that the pair has pulled back a bit from the fresh highs. At the same time, the Relative Strength Index (RSI) is rising above 70, warning about overbought conditions. This could suggest a pause ahead before another leg higher. The bias remains to the upside, with the price above key Simple Moving Averages.

On the 4-hour chart, the pair is moving with a clear bullish bias. However, the Relative Strength Index is showing overbought readings and is turning south. Momentum is flattening, and the MACD offers no clear signals. A correction could take place towards the immediate support seen at 0.6625. Even if it extends to 0.6595, the trend will still be on track for fresh highs. On the contrary, if it rises back and stays above 0.6650, it will strengthen. Expect growing resistance near 0.6665.

Support levels: 0.6620 0.6595 0.6570

Resistance levels: 0.6645 0.6680 0.6720

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.

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