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Summary: The AUDUSD has had a lackluster performance this week, giving back some of its recent gains, while the Australian dollar remains under pressure due to concerns about global economic growth.

Fundamentals

Both the AUDUSD and gold had a lackluster performance in November, retracing some of their gains from late October. As both are trading near key levels, we will be watching for prospects of a rebound or continued correction in the coming days.

From a fundamental perspective, sentiment regarding the global economic outlook, especially in China, needs improvement to help boost the prospects of the AUDUSD. Earlier this week, headlines about the Reserve Bank of Australia's interest rate decision overshadowed a series of weak China October Purchasing Managers' Index (PMI) surveys, indicating that the moderate economic recovery may have come to an end. Given this, the October CPI and PPI reports from China, released on Thursday, continue to influence the performance of this asset.

The report from the National Bureau of Statistics of China stated that overall CPI declined by 0.1% in October, with a year-on-year decrease of 0.2%, both below market expectations. Meanwhile, the October China Producer Price Index (PPI) fell by 2.6% year-on-year, indicating that deflationary pressures persist after the economic conditions worsened. However, the AUDUSD still held steady during the Asian session and continued to gain some support from the mild tone of the US dollar. Nevertheless, the uncertainty about the Fed's future interest rate path may hinder investors from making aggressive bearish bets on the US dollar, thereby pushing down the price of this asset.

Ongoing concerns about global economic growth, along with the weakening of hawkish biases following the Reserve Bank of Australia's decision to raise cash rates to 4.35%, have dampened the AUDUSD's upward momentum, causing the asset to drop below the resistance of its trading range after another failed attempt. Considering both technical and fundamental factors, the AUDUSD remains a sell on rallies, although the pessimism has largely been absorbed at this point.

Technical Analysis

The AUDUSD is leaning towards a neutral stance on an intraday basis. From the 1-hour chart, it is evident that the asset's momentum has shifted towards bearish, as indicated by the hourly RSI divergence. Keeping an eye on the support level at 0.6400 and the 4-hour SMA is recommended.

From a technical perspective, the AUDUSD is approaching the 50-day SMA, a level that has been touched multiple times in October. This suggests that recent price action may determine whether the reversal will continue. While the asset's recent performance has been less impressive, the RSI and MACD continue to rise, indicating the potential for a rebound, and momentum still points higher.

On the upside, the resistance above 0.6500 has proven to be a tough nut to crack. The longer it resists the rebound, the more inclined the bears are to establish new short positions at this level. Below the 50-day SMA, support is found near 0.6365 and 0.6269. The latter has also proven difficult to break, indicating the potential for the asset to remain range-bound in the short term.

On the downside, a break below 0.6400 would indicate that the bulls have been rejected at the 0.6510 resistance level (0.6508 being the 38.2% Fibonacci retracement level from 0.6894 to 0.6269) and would shift the bias back to the downside to retest the low at 0.6269. From a larger perspective, we have not confirmed that the downtrend starting from 0.8006 (the 2021 high) has been completed. While the current rebound from 0.6269 may continue to rise, it could be just the third leg of a corrective pattern starting from 0.6169 (the 2022 low). As long as the 0.6894 resistance level holds, medium-term bearish sentiment will persist. In terms of trading strategy, focusing on going short at highs is recommended.

Trading Recommendations

Trading Direction: Short

Entry Price: 0.6400

Target Price: 0.6210

Stop Loss: 0.6535

Valid Until: 2023-11-23 23:55:00

Support: 0.6387, 0.6343, 0.6286

Resistance: 0.6456, 0.6526, 0.6533