The pair will likely keep falling as bears target the second support at 0.7130, which is about 0.90% below the current level.
The AUD/USD pair dropped to the lowest level since September 30th mostly because of the stronger US dollar. The pair is trading at 0.7200, which is about 4.8% below the highest level this month.
Strong US Dollar
The Australian dollar has fallen against the US dollar as investors price in a more hawkish Federal Reserve. In its most recent interest rate decision, the Fed started tapering its asset purchases by about $15 billion. The bank also committed to adjust the size of the tapering depending on the pace of the economic recovery.
Now, it seems like the pace is relatively strong. Data published on Wednesday showed that number of people filing for initial jobless claims dropped to the lowest level in more than 50 years. This was a surprise report since the number surged to an all-time high of more than 20 million last year.
Therefore, there is a likelihood that the country’s unemployment rate will keep falling in the coming months. At the same time, the US published strong personal consumer expenditure (PCE) data. The number, which the Fed watches closely, rose to 5% in October, the highest level in more than 30 years.
Other numbers from the US painted a picture of an economy that is firing on all cylinders. New home sales jumped sharply in October. In the same period, durable goods orders also jumped.
Therefore, the AUD/USD pair has dropped because analysts expect that the Fed will move faster than the Reserve Bank of Australia (RBA). Indeed, the bank has repeatedly hinted that it will implement the first rate hike in 2024. This is despite the fact that the country’s economy has recovered at a relatively faster rate.
The four-hour chart shows that the AUD/USD pair has been in a strong bearish trend in the past few weeks. The downward trend has been supported by the 25-day and 50-day moving averages. The pair is slightly above 0.7170, which was the lowest level on September 30th. It has also moved to the first support of the standard pivot points.
Therefore, the pair will likely keep falling as bears target the second support at 0.7130, which is about 0.90% below the current level. Still, in the coming days, there is a likelihood that the pair will bounce back as investors buy the dips.