AUDUSD supported around 0.6640s below the 100-DMA, to record minimal weekly losses

  • November 18, 2022
  • The Australian Dollar would finish the week with losses of 0.50%.
  • Existing Home Sales in the United States tanked sharply, though they were ignored as the US Dollar remained strong.
  • AUDUSD Price Analysis: The inverted head-and-shoulders is still in play, though the major is undergoing a correction.

The Australian Dollar (AUD) prepares to finish the week negative, dropping against the US Dollar (USD), as sentiment shifted sour, amidst the lack of a catalyst, except for Federal Reserve policymakers continuing its hawkish campaign. Also, US Treasury yields moderately advanced, underpinning the USD. At the time of writing, the AUDUSD is trading at 0.6675.

US housing data feel the pain of higher interest rates

The United States economic calendar revealed Existing Home Sales for October, which plummeted  5.9%, below a 4.17% expansion expected by economists. It should be said that home sales have fallen since February 2022, as the Fed continued its tightening cycle as they fight elevated inflation levels. In the meantime, a slew of Federal Reserve officials reiterated that inflation is high, that October inflation figures, although encouraging it’s only one positive reading in eleven months and added that they would continue to hike rates.

Despite Fed officials’ efforts to push back against a Fed pivot, it required that St. Louis Fed President James Bullard said that rates are not “sufficiently restrictive” and added that rates would need to go as high as the 5% to 5.25% range. US equities tumbled on those remarks, later echoed by Minnesota’s Fed President Neil Kashkari, commenting that one-month data can’t over-persuade the Fed, as it needs to keep at it until they are sure that inflation has stopped climbing.

During the Asian session, the Australian Dollar took the backseat as the US Dollar gathered strength. The lack of economic data in Australia’s calendar kept traders focused on the last Australian jobs report, which surprised market analysts. However, the Reserve Bank of Australia’s (RBA) expectations for further tightening were unchanged. As of today, money market futures have priced in an 88% chance for a 25 bps hike on the December 5 meeting.

AUDUSD Price Analysis: Technical outlook

After hitting a weekly high above 0.6800, the AUDUSD erased those gains, extending its losses beneath the 100-day Exponential Moving Average (EMA) at 0.6699. Albeit the inverted head-and-shoulders chart pattern formed in the AUDUSD daily chart is still in play, the sudden reversal could be seen as AUD buyers booking profits and taking a breather before assaulting the 0.6800 psychological level.

Hence, the AUDUSD might pull back to the 50% to 61.8% Fibonacci retracement levels around the 0.6545-0.6594 area before rallying towards 0.6800 and beyond to the head-and-shoulders target around 0.6870.