The Australian dollar, paired with the US currency, took advantage of the situation and significantly strengthened its positions, testing the borders of the 67th figure. This is almost a two-month price high.
The price spurt is impressive, but note that the upward momentum of AUD/USD is due solely to the weakening of the US currency. The Australian dollar itself is not in the best shape, as evidenced by the dynamics of the main cross pairs involving the Aussie. Therefore, as soon as the greenback starts to regain lost positions, the AUD/USD pair will inevitably follow it since the Australian dollar has no arguments of its own to fight. Moreover, the minutes of the November meeting of the RBA, which will be published on Tuesday, may strengthen the bearish mood for the pair.
Note that following the results of the last meeting, the members of the Australian regulator again raised the interest rate by 25 points – as in September. At the same time, RBA Governor Philip Lowe commented on the slowdown in the pace of monetary policy tightening, making it clear that the central bank will not return to the 50-point steps. He said that the council "considered it appropriate to raise rates at a slower pace." At the same time, he noted that the members of the regulator discussed the consequences and costs of refusing to raise rates, since the central bank "takes into account the pressure of higher rates and inflation on household budgets."
Thus, Lowe de facto allowed a pause in the process of tightening monetary policy. And although he immediately leveled the corresponding concerns (he said that the refusal to raise rates "will allow inflation to take root in expectations"), in my opinion, the voiced phrase should not be considered as an annoying reservation. This is a signal, or rather, a kind of probing of the soil for further decisions. Presumably, at the December meeting of the RBA, the relevant messages about a possible pause in 2023 will be formulated more clearly and in a more categorical form.
While the representatives of the Fed may soon sound completely opposite signals in their meaning—we are talking about the theses already voiced by Jerome Powell following the results of the Fed's November meeting. He, in particular, stated that the marginal level of the discount rate "will be higher than expected." Powell also announced the likely need for further rate hikes "even if the rate of inflation starts to slow down." If the Fed representatives repeat these theses in one form or another in the near future (including this week), the US dollar will receive significant support. In this case, the upside prospects of AUD/USD will be a big question.
It is worth noting that all of the above fundamental factors will be in the spotlight a little later, perhaps in the second half of this week. Today, the G20 summit is on the agenda, during which the leaders of the United States and China not only met, but have already made their first statements. In particular, Joe Biden said at a meeting with Xi Jinping that Washington and Beijing "must show that they are able to overcome differences." In turn, the Chinese president replied that he was ready to hold "honest negotiations on strategic bilateral issues, discuss the regional and global situation."
Such peaceful statements by the leaders of China and the United States reduced the level of anti-risk sentiment in the markets. But this political factor is likely to have a short-term impact on the mood of traders. In the coming days, currency market participants will switch to classical fundamental factors, including the comments of the Fed representatives.
From a technical point of view, the AUD/USD pair on the D1 timeframe is in the Kumo cloud, below the upper line of the Bollinger Bands indicator. Despite the blitzkrieg, the price failed to overcome the 0.6720 resistance level, which corresponds to the upper line of the above cloud, which coincides with the upper line of the Bollinger Bands. The inability to gain a foothold in the area of the 67th figure, first of all, indicates that it is not advisable to consider longs at the moment.
The initial upward impulse has clearly faded, while in order to overcome the 0.6720 resistance level, buyers need a powerful price spurt that will allow them not only to gain a foothold within the 67th figure, but also to focus on the 68th price level. However, the upward corrective movement is clearly stalled. Therefore, at the moment, it is advisable to take a wait-and-see position for the AUD/USD pair, or consider the option of short positions. And although the second option looks more risky, it is also more attractive in the context of a possible profit. After all, the closest, strongest support level is 0.6480 – at this price point, the lower boundary of the Kumo cloud coincides with the Tenkan-sen line on the daily chart.
