Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6950.
Add a stop-loss at 0.7055.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7055.
Add a stop-loss at 0.6950.
The AUD/USD pair has pulled back in the past few days as the recent rally lost momentum. It dropped slightly after the Reserve Bank of Australia (RBA) delivered its interest rate decision. It was trading at 0.700, a few points below last week’s high of 0.7065.
RBA Hikes Interest Rates
The AUD/USD pair dropped after the Reserve Bank of Australia delivered its interest rate decision. Officials voted to hike interest rates by 0.25% to 4.85% in line with expectations. It was the fifth rate hike of the year, making the RBA the most hawkish central bank in the world.
The bank hike came after the recent macro numbers suggested that the country’s inflation has continued rising in the past few months. Data released last week showed that the country’s inflation rose 4.3% in the third quarter, higher than what analysts were expecting. The trimmed and weighted mean averages also continued rising.
In its statement, the bank noted that it may need to hike interest rates again this year in a bid to lower inflation. However, the challenge is that inflation is being driven by elevated crude oil prices because of the US-Iran war.
The AUD/USD pair will next react to the upcoming US jobs numbers. The Bureau of Labor Statistics (BLS) will publish the latest job vacancy numbers later today. ADP will then release the latest private payrolls numbers on Wednesday, while the BLS will release the initial and continuing jobless claims on Thursday.
The BLS will then publish the official nonfarm payrolls data on Friday. Economists expect the data to show that the economy added over 60k jobs last month. However, the past estimates by analysts have been relatively lower than expected.
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AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has come under pressure in the past few days. It dropped from a high of 0.7066 to the current 0.7000.
The pair has now moved slightly lower than the 50-day moving average, a sign that the recent rally is losing momentum. At the same time, the Relative Strength Index (RSI) has dropped in the past few days.
Therefore, the pair will likely continue falling in the coming days. If this happens, the next key target to watch will be at 0.6900. A move above the key resistance level of 0.7055 will invalidate the bearish outlook.
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