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Aussie is Getting Overbought Now

The AUD/USD price rose after relatively weak Chinese economic data. According to the National Bureau of Statistics (NBS), retail sales declined by 0.5% in October while industrial production and fixed asset investments dropped to 5.0% and 5.8%, respectively.

Bearish view

  • Sell the AUD/USD pair and set a take-profit at 0.6700.
  • Add a stop-loss at 0.6900.
  • Timeline: 1-2 days.

Bullish view

  • Set a buy-stop at 0.6820 and a take-profit at 0.6920.
  • Add a stop-loss at 0.6725.

The AUD/USD price rally gained steam after another set of positive American inflation data and the meeting between Xi Jinping and Anthony Albanese. It spiked to a high of 0.6793, the highest level since September.

Xi Jinping and Albanese meeting

The AUD/USD welcomed the meeting between Australia’s and Chinese leaders at the G20 meeting in Indonesia. The meeting sought to calm tensions between the two countries, which deal with goods worth billions of dollars every year/

This crisis started when Australia joined other western countries to ban Huawei from its 5G network in 2020. They accelerated when Australia joined other western countries in seeking for answers for the Covid-19 pandemic.

In the aftermath, China announced a set of sanctions and tariffs on some of the top Australian exports like wine, coal, beef, lamb and iron ore. Therefore, the AUD/USD price rallied as investors predicted that these talks would lead to a reset of relationship.

The two leaders agreed on the need for more dialogue going forward. However, it is still unclear whether the two countries will resume normal trade relations in the near term.

The AUD/USD price rose after relatively weak Chinese economic data. According to the National Bureau of Statistics (NBS), retail sales declined by 0.5% in October while industrial production and fixed asset investments dropped to 5.0% and 5.8%, respectively.

The pair also rose after another set of American inflation data. According to the Bureau of Labor Statistics (BLS), the producer price index declined from 8.4% in September to 8.0% in October. Core PPI, which excludes the volatile items, declined from 7.1% to 6.7%.

These numbers came a week after the US published encouraging consumer inflation data. Therefore, most analysts expect that the Federal Reserve will start its pivot in the coming meeting.

AUD/USD forecast

The AUD/USD price has been in a strong bullish trend n the past few weeks. It accelerated after the price moved above the important resistance level at 0.6518, the neckline of the inverted head and shoulders pattern. 

The pair also rallied above the 25-day and 50-day moving averages while the Stochastic Oscillator has moved above the overbought level. The RSI has also moved to the overbought point.

Therefore, the pair will likely have a brief pullback in the near term on profit-taking. This pullback could see it drop to about 0.6600.

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