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Abstract: The AUDUSD remained unchanged on Wednesday after a sharp rise the previous day. During the European session, the AUDUSD traded below the key resistance of 0.6526; After breaking this level, the AUDUSD will end up in the downward mode that started on June 16.

Fundamentals

Wage growth in Australia climbed by 1.3% in the third quarter from a year earlier, which is in line with general market expectations and above the upwardly adjusted 0.9% increase in the second quarter. This was the highest increase since records began in 1997, but the increase was mainly due to an increase in the minimum wage and a pay rise for aged care workers.

The strong wage growth is the result of many factors, which means that it has little impact on the market pricing of interest rate hikes. Because the market has digested the expectation that the Reserve Bank of Australia (RBA) will suspend interest rate hikes on December 5. The RBA raised interest rates earlier this month after four consecutive suspensions, but the market thought that the rate hike was moderate, and the AUD fell after the decision.

Australia released employment data on Thursday, and the labor market showed resilience. It is estimated that the economy will add 20,000 jobs in October, compared with 6,700 in September. The RBA will pay close attention to consumer inflation expectations, which are expected to drop from 4.8% to 4.1% in October.

The U.S. inflation report in October was only slightly lower than expected, but the USD fell sharply against major currencies on Tuesday. The AUDUSD soared 2%. On a monthly basis, the overall inflation rate remained unchanged in October for the first time in 15 months, and the decline in gasoline prices helped push down the inflation rate. On an annual basis, the overall inflation rate dropped from 3.7% to 3.2%, which was lower than the market expectation of 3.3%. Core inflation fell slightly to 4.0%, lower than 4.1% in September, which is also the market consensus.

Technical Analysis

The AUDUSD has an intraday bias to the upside. Both the Relative Strength Index and MACD are moving higher. If the AUDUSD keeps consolidating around the 0.6500 level, it is expected to test the key resistance level of 0.6526, a break of which would open the door to the 0.6600 range.

At the same time, a decisive breakthrough of 0.6526 will show that the entire pullback from 0.7156 has been completed. Next, we should see a stronger rebound to the resistance level of the descending channel (currently 0.6684).

On the downside, a secondary support level below 0.6455 would make the price return to neutral.

However, from a broader perspective, we haven't confirmed that the downtrend from 0.8006 (2021 high) has been completed. While the current rebound from 0.6269 could continue higher, it could be the third leg of the upward adjustment from 0.6169 (2022 low). For now, the medium-term bearish sentiment will persist as long as the 0.6894 resistance level is held.

Overall, the AUDUSD bulls are trying to end a 5-month downtrend in support of a positive picture in the near term. However, in practical terms, (as shown in the chart) it is likely to see the bull profit-taking in the near term. It is recommended to go short at the highs.

Trading Recommendations

Trading direction: Short

Entry price: 0.6526

Target price: 0.6390

Stop loss: 0.6600

Deadline: 2023-11-29 23:55:00

Support: 0.6484, 0.6455, 0.6391

Resistance: 0.6534, 0.6552, 0.6609