The Australian dollar (AUD) is poised to sustain its downtrend in the short term, despite the recent depreciation of the US dollar. The Reserve Bank of Australia (RBA) maintains a dovish stance, expressing concerns about inflation and the sluggish pace of economic growth. These apprehensions are expected to overshadow the support offered by the weakened US dollar.
Australia is grappling with a 32-year high inflation rate, coupled with lackluster economic growth. The RBA is apprehensive that these factors might lead to a recession. Despite the RBA's dovish stance and economic worries, the recent weakening of the US dollar has occurred due to various factors, including the Federal Reserve's decision to decelerate its interest rate hikes. While the US dollar's depreciation has provided some backing to the AUD, it is unlikely to fully counterbalance the negative factors influencing the Australian currency.
In summary, the outlook for the AUD remains bearish. The RBA's dovish stance and concerns about inflation and the economy are expected to outweigh the supportive impact of the weakening US dollar.
In the past week's trading sessions, AUDUSD underwent a bearish rally, erasing 50% of its bullish October momentum. The currency pair is currently consolidating within a tight trading range, accompanied by the appearance of bullish candlestick reversal patterns like the bullish engulfing and piercing patterns. These signals suggest that the conclusion of the bearish rally might be imminent. Notably, these patterns emerged as the RSI crossed below the oversold level at 30, strengthening the potential for a bottoming process that could lead to a bullish reversal. Confirmation of this reversal would be signaled by a bullish golden cross on the EMA 50 & 200.
Both RSI and MACD oscillators currently reflect a bearish sentiment. For RSI to shift to a bullish stance, it must breach the 60 level. Regarding MACD, where both the histogram and the signal line reside below the 0 level, a closer look indicates a bearish correction aligned with the current consolidation in a tight range. To turn MACD bullish, both the histogram and the signal line need to cross above the 0 line.
In technical terms, the overall trend for AUDUSD remains decidedly bearish. However, it's noteworthy that two bullish candlestick reversal patterns, namely the bullish engulfing and piercing patterns, surfaced concurrently with the RSI crossing above the oversold threshold.
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