Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6895.
Add a stop-loss at 0.7025.
Timeline:1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7025.
Add a stop-loss at 0.6895.
The AUD/USD pair continued its downward trend, even after the Reserve Bank of Australia (RBA) hiked interest rates to the highest level in eighteen years. It dropped to 0.6965, modestly lower than last week’s high of 0.7066.
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RBA Interest Rate Hike and US Nonfarm Payrolls Data
The AUD/USD pair continued falling after the RBA delivered its interest rate decision, in which officials decided to hike interest rates to its highest point in 18 years, with officials revising up its inflation forecasts.
The bank hiked rates to 4.85% in its fifth consecutive increase of the year, making it the most hawkish central bank in the world. It now expects inflation to remain above 3% next year, with officials expecting it to be embedded.
Just last week, data by the Australian Bureau of Statistics (ABS) showed that the headline consumer price index rose 4% in the last 12 months to September, moving further away from the bank’s target of 2.5%. Therefore, the pair dropped because the rate hike was already priced in.
The pair will next react to the upcoming US jobs reports, with the ADP private payrolls report expected to show that the private sector added 67k jobs last month. Another report coming out on Friday is expected to show that the economy added 63k jobs.
The report will be important because it comes after the Federal Reserve delivered its interest rate decision, leaving them unchanged between 3.75% and 4%. Officials hinted that the bank will hike rates in the next meeting. As such, the upcoming jobs numbers will provide more hints on whether the bank will hike rates or leave them unchanged.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair rose to a high of 0.7066 last week, where it formed a bearish engulfing pattern. It then retreated, reaching its lowest level since October 19 this year.
The pair has dropped below the middle line of the Bollinger Bands indicator. Also, the pair has flipped the Supertrend indicator from green to red, a sign that bears have prevailed.
The Relative Strength Index (RSI) and other oscillators have also continued falling. Therefore, the pair will likely continue falling, with the next important target to watch being at 0.6895, its lowest level on October 15. On the other hand, a move the resistance level of 0.7000 will invalidate the bearish outlook.
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