Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7000.
- Add a stop-loss at 0.6850.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6900 and a take-profit at 0.6800.
- Add a stop-loss at 0.7000.
The AUD/USD exchange rate rose for three consecutive days, reaching a high of 0.6942, its highest point since February 2023. It has risen by almost 10% from its lowest point this year.
China stimulus hopes
The Australian dollar has been in a strong bull run in the past few days, helped by the rising commodity prices.
Iron ore and coal prices have bounced back in the past few days after China announced a series of stimulus measures. In a statement last week, the country’s central bank reduced interest rates and lowered the reserve requirement ratio by 50 basis points, a move that will unlock over $120 billion in cash.
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Beijing also announced plans to issue sovereign bonds worth over $284 billion to stimulate the economy. These actions are important because China is the biggest buyer of Australia’s commodities like iron ore and coal.
The AUD/USD pair also rose after the Federal Reserve chair hinted that it would be cautious when cutting interest rates.
In a statement, he said that he was confident that the economy would avoid a hard landing and that the bank would be gradual when cutting rates. As a result, the US dollar index (DXY) and bond yields rose.
The next key catalyst to watch will be the upcoming ISM manufacturing PMI and the JOLTS job openings data. Analysts expect the data to show that the PMI retreated from 47.2 to 47.0 in September, meaning that the sector continued to contract.
The other report by S&P Global is expected to show that the manufacturing PMI fell to 47 in September. Also, data by the Bureau of Labor Statistics (BLS) is expected to show that the number of job openings dropped to 7.64 million in September.
AUD/USD technical analysis
The AUD/USD exchange rate continued rising, reaching a high of 0.6915, its highest point since February 2023.
It has jumped above the key resistance point at 0.6871, its highest point on December 28. It has also risen above the crucial resistance level at 0.6893 (June 2023 high).
The pair has moved above the 50-day and 25-day Exponential Moving Averages (EMA), while the MACD and the Relative Strength Index (RSI) have tilted upwards.
Therefore, the pair will likely continue rising as bulls target the next point to watch being at 0.7000. The stop-loss of this trade will be at 0.6850.
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