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Summary: During Tuesday's Asian session, the AUDUSD extended gains to 0.6600. Optimistic comments from Reserve Bank of Australia (RBA) Governor Michele Bullock and a broad decline in the US dollar provided support for the asset. The market maintained a cautiously optimistic stance ahead of the crucial US November Consumer Price Index (CPI) inflation data.

Fundamentals

During Tuesday's Asian session, the AUDUSD extended gains to 0.6600, continually forming higher highs and higher lows. Optimistic comments from RBA Governor Michele Bullock and a comprehensive decline in the US dollar supported the asset.

The latest data from Australia showed a slight increase in the Westpac Consumer Confidence Index, rising by 2.7% month-on-month to 82.1 in December. Despite the increase in consumer confidence, Westpac's analysis still describes this sentiment as "still very weak" and emphasizes that "consumers remain far from upbeat."

RBA Governor Michele Bullock expressed confidence, stating, "Don't think we are falling behind in the inflation fight." Bullock emphasized a cautious approach, closely monitoring data, and underscored the RBA's commitment to maintaining employment growth. The central bank's goal is to prevent inflation expectations from "getting out of control."

Market observations suggest that recent consumer confidence survey results indicate a higher threshold for further tightening policies, echoing the central bank's emphasis on "slowing growth" and the "particularly soft household sector."

However, it is crucial to note the central bank's stance on inflation. The RBA has stated a "very low tolerance for any upside surprises" in inflation rates, making the upcoming inflation data and the detailed quarterly report scheduled for release at the end of January critical for the February policy decision.

The Federal Open Market Committee (FOMC) began its two-day monetary policy meeting on Tuesday, with the market widely expecting no change in interest rates during the last meeting of the year. Market participants will closely watch the statement for signals of possible rate adjustments next year. On Tuesday, investors will also focus on the US November Consumer Price Index (CPI) report, providing insights into the potential monetary policy path.

Technical Analysis

The AUDUSD has been in a downtrend throughout the year, and the current trend is in a correction phase. As 2023 is coming to an end, this retracement is approaching the 50% Fibonacci retracement level of the year's high and low, with a potential target at the 0.6800 level to seek higher premiums.

The AUDUSD rebounded today, continually forming higher lows and higher highs, but it remains within the range below 0.6689.

Currently, the asset tends to maintain a neutral stance in intraday trading, with moderate downside risks. Breaking below the 0.6524 level will confirm the rejection of the upward structure and restore the decline from the short-term peak at 0.6689 to 0.6500 and below. However, if the lows continue to rise and break above 0.6689, it will restore the uptrend initiated from the bottom at the 0.6269 level and aim for a further test of the average of this year's high and low at 0.6715. Further gains may extend to the 0.6800 level.

From a larger perspective, we have not confirmed the completion of the downtrend starting from 0.8006. The price action starting from 0.6169 (2022 low) may be just a midterm corrective pattern, with the downtrend from 0.7156 being the second phase. Currently, range trading should be between 0.6169 and 0.7156 (2023 high) before further development.

Overall, the long-term outlook for the AUDUSD remains unclear. Although confirmation of the current trend will come with another correction, a decisive break above 0.6689 is needed to dispel these doubts. The recommended trading strategy is to buy on dips.

Trading Recommendations

Trading Direction: Long

Entry Price: 0.6573

Target Price: 0.67950

Stop Loss: 0.6500

Valid Until: 2023-12-26 23:55:00

Support: 0.6550, 0.6525, 0.6521

Resistance: 0.6620, 0.6676, 0.6690