High Timeframe Oversold RSI Signals Imminent Bearish Correction

Summary:

The Relative Strength Index (RSI) reached a local high of 76 on the 12-hour timeframe , entering clearly overbought territory. This high-timeframe reading suggests that the underlying momentum is exhausted.

Sell AUDUSD

EXP

PENDING

0.66860

ENTRY

0.65550

TGT

0.67250

0.66520 -0.00118 -0.18%

Point

PENDING

0.65550

TGT

CLOSING

0.66860

ENTRY

0.67250

The Australian Bureau of Statistics (ABS) reported that the Unemployment Rate held steady at 4.3% in November, defying the consensus estimate for an increase to 4.4%. However, this stability was offset by a decline in the number of employed persons, which fell by 21.3K during the reported month. This was a drop from the 41.1K gain in October and missed the forecast of 20K, suggesting underlying weakness in the labor market.

Australian Dollar bulls remain supported by a sharp change in rate expectations. Traders no longer anticipate additional rate cuts from the Reserve Bank of Australia (RBA). Instead, the central bank may signal that its monetary policy easing cycle is complete, given persistent inflationary pressures. In the third quarter, the Consumer Price Index (CPI) surged to 3.2% year-over-year (YoY), up from 2.1% in the second quarter, confirming that inflation remains firmly entrenched. Expectations are firmly aligned with the RBA maintaining its policy rate unchanged at 3.6%. Some markets are even pricing in a rate hike as early as 2026, encouraged by strong household spending which increased by 1.3% in October.

On Wednesday, the Federal Reserve (Fed) cut interest rates by 25 basis points (bps) amid a period of elevated prices, as inflation approaches the 3% mark. However, the central bank heavily implied a pause in its easing cycle, with Chair Jerome Powell reiterating that they are in a "wait-and-see" mode and that rates are now in the upper range of neutrality.

Powell acknowledged the inherent tension between the central bank's dual mandate. He stressed that the Fed is "well positioned" to "wait and see" how the economy evolves, having already eased policy by 75 bps this year. Powell concluded that after 175 bps of cuts, "we've moved our policy back to a level that is certainly not strongly restrictive right now," adding, "I think it is in a neutral range."

Recent U.S. labor data presented a mixed picture. Initial jobless claims for the week ending December 6th rose to 236K, a considerable increase from the upwardly revised 192K the previous week, according to the Department of Labor. In contrast, continuing claims for the week ending November 29th fell to 1.838 million from 1.937 million, suggesting some stabilization in long-term unemployment. Separately, the U.S. goods and services trade balance narrowed to $-\$52.8$ billion in September, an improvement from $-\$59.3$ billion in August and better than expected. High Timeframe Oversold RSI Signals Imminent Bearish Correction_1

High Timeframe Oversold RSI Signals Imminent Bearish Correction_1

Technical Analysis

The AUD/USD pair recently surged in a strong upward impulse following the Fed's rate cut, touching the 0.6685 level—a high not seen since September 17th. On that past occasion, the price reacted sharply downward, initiating a move that bottomed out at the local support of 0.6420. This historical rejection suggests that the pair may be establishing a broad trading range where price movement oscillates between these boundaries.

The confluence of the 100-period and 200-period Moving Averages (MAs) on the 12-hour chart, located tightly at 0.6537 and 0.6539 respectively, has provided sideways guidance since late September, adding pressure for the price to remain range-bound. Crucially, the Relative Strength Index (RSI) reached a local high of 76 on the 12-hour timeframe , entering clearly overbought territory. This high-timeframe reading suggests that the underlying momentum is exhausted. The convergence of historical resistance and extreme oversold conditions is likely to compel AUD/USD into a bearish correction, potentially driving the price back toward the 0.50 Fibonacci retracement zone, around 0.6555.

Trading Recommendations

Trading direction: Sell

Entry price: 0.6686

Target price: 0.6555

Stop loss: 0.6725

Validity: Dec 23, 2025 15:00:00

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