Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.7150.
Timeline: 1-2 days.
Bullish view
Sell the AUD/USD pair and set a take-profit at 0.7150.
Add a stop-loss at 0.700.
The AUD/USD pair retreated for a third consecutive day, sliding to 0.7075, its lowest level since August 19, as investors digested the Federal Reserve's interest rate decision. The pair is now sharply off this month's high of 0.7237, with traders turning their attention to the Reserve Bank of Australia's next move.
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Federal Reserve Hikes Rates
The Australian dollar fell sharply as the US dollar strengthened after the Federal Reserve raised interest rates in line with analyst expectations. The Fed hiked rates by 0.25% to a range of 3.75% to 4%, with officials hinting at further increases as inflation continues to climb.
Economists now expect that the bank will hike rates by another 0.25% either in the October or December meetings. For one, consumer and producer inflation will continue rising in the coming months since crude oil prices continue rising amid the US-Iran war.
The AUD/USD pair also retreated after the US released another strong macro data. A report showed that retail sales rose 1.2% in August, higher than the expected 0.8%. It was a big increase after the sales fell by 0.5%. Core sales, which exclude the volatile food and energy prices, rose by 1.4% in August, also higher than the expected 0.6%.
The US will next release the latest initial and continuing jobless claims data, followed by the housing starts, building permits, and the Philadelphia Fed manufacturing index reports.
The AUD/USD pair will also react to the upcoming Reserve Bank of Australia (RBA) interest rate decision. Economists expect the bank to hike interest rates in the next meeting since Australian inflation has also remained at an elevated level. It will be the fourth rate hike this year.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has slumped in the past few days. It has slumped from a high of 0.7237 in August to the current 0.7085. The pair has slumped below the ascending trendline that links the lowest levels since August.
It has also fallen below the 50-day moving average and the Major S/R pivot point of the Murrey Math Lines tool. Therefore, the pair will likely continue falling, with the next level to watch being at 0.7000. A move above the resistance at 0.7150 will invalidate the bearish outlook.
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