Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6585 and a take-profit at 0.6500.
- Add a stop-loss at 0.6655.
The AUD/USD exchange rate bounced back after a stream of weak economic numbers from the United States pushed the greenback sharply lower. It also rose as hedge funds and other speculators reduced their short bets on the Aussie. It rose to a high of 0.6647, its highest point since March 8th.
RBA decision ahead
The US dollar dropped sharply after a series of weak US economic data. On Tuesday, a report by Conference Board revealed that consumer confidence crashed to its lowest point since 2022. That is an important figure since their spending is the biggest part of the American economy.
A separate report by the ISM showed that the country’s manufacturing PMI slumped below 50 in April. It had previously crossed the expansion zone of 50 a month earlier. Worse, the non-manufacturing PMI figure released on Friday sunk to 49.4.
Meanwhile, a report by the Bureau of Labor Statistics (BLS) showed that the labor market worsened in April. The unemployment rate rose to 3.9% while the average hourly earnings rose by 3.9%, its weakest level in month. The economy added 175k jobs, missing the estimated 238k.
Therefore, the market has started to readjust its positioning for the next Federal Reserve interest rate cut. Analysts are now expecting two cuts this year instead of 1. The challenge is that inflation is also stubbornly high, with data showing that it has stopped falling.
Looking ahead, the next important AUD/USD news will be the RBA interest rate decision set for Tuesday. The bank will likely leave rates unchanged as it also battles high inflation rate.
Australia’s inflation is mostly being driven by the real estate sector. Recent data shows that housing rental value rose to a record high in April. According to CoreLogic, the median dwelling rent rose to A$613 per week, an 8.5% increase from the same period in 2023.
Separately, a report by CFTC showed that speculative net positions improved to minus 83.2k, its highest point in two months.
AUD/USD technical analysis
The Australian dollar rose to the important resistance level at 0.6645 on Friday. This was a crucial level since it was also the highest swing on March 8th and April 9th. The pair has crossed the crucial 50-day and 25-day moving averages.
It has also flipped the Ichimoku cloud indicator. The Relative Strength Index (RSI) has risen above the neutral point while the two lines of the Percentage Price Oscillator (PPO) have formed a bullish crossover pattern. It has also formed a small inverse head and shoulders pattern.
Therefore, the pair will likely continue rising ahead of the RBA decision. If this happens, the next point to watch will be the psychological point at 0.6700.
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