Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6590.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6625 and a take-profit at 0.6700.
- Add a stop-loss at 0.6550.
The AUD/USD pair retreated sharply even after the odds of a Reserve Bank of Australia (RBA) rate hike increased. It also crashed to a low of 0.6615 as the US dollar index (DXY) jumped to its highest level since May 14th.
RBA rate hike odds
The recent minutes by the Reserve Bank of Australia showed that officials considered hiking interest rates in the last meeting. Now, there are signs that the bank may decide to increase rates in its June 18th meeting.
A report by the Australian Bureau of Statistics (ABS) showed that the monthly Consumer Price Index (CPI) indicator rose from 3.50% in March to 3.60% in April. This increase was higher than the median estimate of 3.40%.
There is a likelihood that the country’s inflation will remain higher than the RBA estimate of 2.0%, especially as the recently announced stimulus packages flow to the economy on July 1st. A rate hike would make the bank an outlier as other central banks start slashing interest rates.
Top Regulated Brokers
The AUD/USD tumbled as the US dollar index continued soaring. It jumped to a high of $105, its highest level in almost two weeks. This surge continued after the US published a strong consumer confidence report.
According to the Conference Board, the country’s consumer confidence rose to over 100 this month. It was the first monthly increase since February, signaling that the economy is doing modestly well.
The next important economic data will come out on Thursday when the US publishes its second estimate of the GDP data. Economists expect the data to show that the economy expanded by 1.6% in Q1, down from 3.4% in Q4.
These numbers will come a day ahead of the crucial Personal Consumption Expenditure (PCE) report. Economists expect the data to show that the PCE figure remained above the Fed’s target of 2.0% in April.
AUD/USD technical analysis
The AUD/USD exchange rate has slumped hard in the past few days after peaking at 0.6713 on May 16th. It has slumped below the support at 0.6645, its highest swing on May 3rd and April 9th. The pair has crashed below the 50-period moving average and the Woodie pivot point.
Also, the Stochastic Oscillator and the MACD indicators have all pointed downwards. Therefore, the pair will likely continue falling as sellers target the key support at 0.6590, its lowest swing on May 24th.
Ready to trade our free trading signals? We’ve made a list of the top forex brokers in Australia for you to check out.