AUD/USD Forex Technical Analysis – Underpinned by RBA Rate Hike Expectations

The Australian Dollar is edging higher on Friday as investors shrugged off more hawkish commentary from Federal Reserve officials that helped lift the U.S. Dollar the previous session.

At 09:00 GMT, the AUD/USD is trading .6703, up 0.0011 or +0.16%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $66.18, down $0.63 or -0.94%.

The Aussie Dollar took a hit on Thursday when St. Louis Fed President James Bullard warned U.S. interest rates might have to rise to between 5% and 7% to truly tame inflation.

RBA Not Expected to Pause Rate Hikes

The AUD/USD found some buyers late Thursday and early Friday on increased expectations the Reserve Bank of Australia (RBA) would hike again in December following upbeat data on jobs and wages this week.

Futures implied around an 80% chance of a quarter-point rise to 3.10%, having largely given up on talk the central bank might actually pause its tightening.

“Robust wages and employment growth cements a 25bp rate hike for December,” said David Plank, head of Australian economics at ANZ. “And we think the RBA will deliver at least another 75bp of hikes by May 2023, which will take the cash rate target to 3.85%.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6798 will signal a resumption of the uptrend. A move through .6386 will change the main trend to down.

The AUD/USD is currently trading inside a long-term retracement zone with the 50% level at .6760 resistance and the 61.8% level at .6466 support.

Inside this range is another retracement zone at .6631 and .6453. The AUD/USD is currently trading on the strong side of this zone, making it support.

Daily Swing Chart Technical Forecast

Trader reaction to .6716 is likely to determine the direction of the AUD/USD on Friday.

Bullish Scenario

A sustained move over .6716 will indicate the presence of buyers. If this move creates enough upside momentum then look for a surge into the major 50% level at .6760. Overtaking this level could lead to a retest of .6798 and possibly a breakout to the upside.

Bearish Scenario

A sustained move under .6716 will signal the presence of sellers. This could trigger a break into .6631. This level stopped the selling on Thursday. If it fails then look for the selling to possibly extend into .6543.