The AUD/USD pair continued its impressive run on Friday, climbing to approximately 0.6620 during the early hours of European trading. This surge reflects strong performance from the Australian dollar (AUD), which has been buoyed by anticipations that the Reserve Bank of Australia (RBA) might adopt a more aggressive monetary policy to stabilize inflation expectations.
The RBA’s hawkish sentiment was further supported after the release of household expenditure data for October, which showed a 1.3% rise compared to the previous month’s 0.3%. Additionally, RBA Governor Michelle Bullock noted earlier this week that adjustments to monetary policy might be necessary if inflation remains persistent.
On the other hand, the US dollar (USD) seems to be trading with some caution. Investors are speculating about a potential interest rate cut by the Federal Reserve in their upcoming policy announcement. CME’s FedWatch tool indicates an 87% likelihood that the Fed will decrease rates by 25 basis points (bp) to a range of 3.50-3.75% in December.
AUD/USD daily chart
The AUD/USD reached 0.6622 on Friday. The 20-day exponential moving average (EMA) shows an upward trend, with prices consistently above it, reinforcing a bullish outlook. The distance from the EMA suggests an expanding trend rather than a possible reversal.
Currently, the 14-day relative strength index (RSI) sits at 66.00, indicating strong momentum without entering overbought territory. As long as the RSI stays above 60, there’s a positive signal for potential upside, though caution is warranted if a reversal occurs. The 20-day EMA support is noted at 0.6542; should the daily close drop below this, it could suggest a corrective pullback. Conversely, breaking above the October peak of 0.6629 might propel the AUD towards the recent high of 0.6660 from September.
