Bearish View

• Sell the AUD/USD pair and set a take-profit at 0.6450.
• Add a stop-loss at 0.6565.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 0.6520 and a take-profit at 0.6600.
• Add a stop-loss at 0.6450.

(Click on image to enlarge)

The AUD/USD pair was trading at 0.6515 on Monday morning, up by 1.25% from its last week’s low of 0.6435. It remains substantially lower than the year-to-date high of 0.6942.
 

US Dollar Index Reverses

The AUD/USD pair remained in a tight range as the US dollar index (DXY) dropped. Data shows that the US dollar index (DXY) dropped from $108.05 on November 22 to $105.78, its lowest level since November 12.

The US dollar index retreated after the US published mixed economic numbers last week. These numbers showed that the economy expanded by 2.8% in the third quarter, meeting what analysts were expecting.

Another report showed that the personal consumption expenditure (PCE) rose from 2.2% in September to 2.3% in October. The PCE was in line with what analysts were expecting and a few points above the Fed’s target of 2.0%.

The next important USD data to watch will be the upcoming US nonfarm payroll (NFP) data scheduled on Friday. Economists expect the data to show a strong improvement in the labor market after it imploded in the previous month.

According to Investing, economists expect the data to show that the economy added over 202k jobs in November from 12k in the previous month. The unemployment rate is expected to move from 4.1% to 4.2%.

These numbers will come as the Federal Reserve considers whether to cut interest rates again in the next meeting. The bond market points to a gradual pace of rate cuts, meaning that it may decide to leave rates unchanged in December.
 

AUD/USD Technical Analysis

The AUD/USD exchange rate has been in a strong downward trend in the past few months, moving from a high of 0.6942 in September to 0.6435 last month. It has formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.

The pair has also formed a bearish pennant pattern, which is characterized by a long vertical line and a symmetrical triangle pattern.

Therefore, the AUD/USD pair will likely have a strong bearish breakout as sellers target the key support at 0.6450l, its lowest point in November. The stop-loss of this trade will be at 0.6650.

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