The Australian Dollar (AUD) is likely to test the 0.6500 level against the US Dollar (USD) soon. A sustained drop below this point seems improbable. Analysts point out that while the upward momentum has faded, there may be emerging downward momentum that could push the AUD to around 0.6480. In the short term, the AUD was expected to stabilize between 0.6555 and 0.6595, but it fell to a low of 0.6513. Despite this drop, there isn’t strong pressure driving it lower. This suggests that there is resistance at 0.6545, and if it breaks through this level, stabilization above 0.6560 is possible. Looking ahead one to three weeks, the previous positive outlook for the AUD at 0.6625 has shifted. A downward trend now seems more likely, especially if it stays below 0.6585. There is also support anticipated at 0.6480, which is not expected to be tested in the short term. Overall, the Australian dollar is expected to hit the 0.6500 mark against the US dollar soon. The current decline isn’t severe enough to suggest a crash below this level is likely, so a cautious approach is advised rather than a fully bearish strategy. Recently, Australian inflation has slowed, with the quarterly Consumer Price Index (CPI) at 3.1%. This decrease eases pressure on the Reserve Bank of Australia to raise rates. In contrast, the US Federal Reserve remains hawkish, which supports a stronger USD. This difference in central bank policies supports the view that the AUD may weaken. For derivative traders, buying put options with a strike price near the 0.6480 support level could be a good move to profit from expected declines. Additionally, a bear call spread strategy, which involves selling calls around the 0.6585 resistance level, can take advantage of limited upward movement. This strategy benefits from a drop or even sideways movement, both of which seem likely. Looking at late 2023 and early 2024, historical data shows that the 0.6500 level has often acted as a strong floor, suggesting that buyers may step in at this level. Moreover, recent manufacturing data from China has been weak, which often signals reduced demand for key Australian exports, putting more pressure on the currency. This reinforces the notion that support may be tested but could hold. As a result, we should closely monitor the 0.6585 price point for any short positions. If the AUD sustains a move above this level, it would indicate that the downward pressure is lessening, making it a critical area for stop-loss orders. We will manage our positions carefully, as the outlook suggests a controlled decline rather than a drastic drop.

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