AUD to USD Forecast: Technical Signals Warn of Reversal Risk as Aussie Dollar Approaches 15-Month Peak

The Australian Dollar continues its push higher against the US Dollar, with AUD/USD hovering around 0.6738 near its strongest levels in over a year. However, technical warning signs are beginning to emerge, suggesting traders should remain cautious as momentum indicators flash overbought signals.

Economic Backdrop Supporting Recent Gains

Recent data from Australia provided initial tailwinds for the currency. November’s inflation figures showed continued moderation, with the Consumer Price Index holding flat month-over-month following October’s unchanged reading. On an annual basis, the CPI decelerated to 3.4% from the prior 3.8%, though it still sits above the Reserve Bank of Australia’s 2-3% target corridor. The trimmed mean CPI, which policy makers closely monitor, increased 0.3% monthly and 3.2% annually, both representing slower growth than the previous month.

Across the Pacific, US economic releases delivered mixed signals. Private employment gains in December came in at 41K according to the ADP report, disappointing relative to the 47K forecast, though this still represented improvement from November’s 32K decline. The services sector PMI surprised positively, jumping to 54.4 in December from 52.6 and surpassing the 52.3 consensus estimate. Meanwhile, job openings data disappointed, with the JOLTS report showing November openings slipped to 7.146 million from 7.449 million against expectations of 7.6 million.

Technical Picture: Momentum Overdrive Raises Red Flags

The charts tell a story of strength tempered by near-term vulnerability. The Relative Strength Index has climbed to approximately 69, venturing into overbought territory and signaling potential for a pullback in the near term. Despite this caution, the underlying structure remains decidedly bullish—prices decisively penetrated the former trendline resistance near 0.6550 and maintain positions comfortably above both the 50-day and 100-day Simple Moving Averages.

Should a pullback materialize, initial support emerges around 0.6660. A failure to hold this level could intensify selling pressure and potentially expose the 0.6590-0.6570 zone, where the 50-day and 100-day moving averages intersect to create a meaningful technical floor. The Average Directional Index near 35.36 reinforces that the current uptrend possesses considerable strength.

Path Forward: Upside Targets Beckon

Looking ahead, if the uptrend extends further, the 0.6800 psychological barrier presents the next focal point, with potential for additional gains toward the 2024 high above 0.6900. Traders monitoring AUD to USD movements should watch for whether the currency can sustain momentum above current overbought conditions or succumbs to the pullback risk that technical indicators are presently highlighting.