Bullish View
Set a buy-stop at 0.7190 and a take-profit at 0.7275.
Add a stop-loss at 0.7130.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 0.7130 and a take-profit at 0.7050.
Add a stop-loss at 0.7200.
The AUD/USD pair is hovering near its highest level in two weeks as investors focus on the upcoming US retail sales data and the Federal Reserve decision. The pair is trading at 0.7173, which is about 2.60% above the lowest level this month.
US Retail Sales and Fed Decision
The AUD/USD pair rose last week after the latest interest rate decision by the Reserve Bank of Australia (RBA). The bank left interest rates unchanged and signaled that it will be patient when it comes to rate hikes. It also decided to continue with its quantitive easing policy.
The pair also rose after the strong US inflation numbers that were published on Friday. The data revealed that the overall inflation rose to 6.8% in November as energy prices rose and supply chain disruptions remained. Excluding energy and food prices, inflation rose to almost 5%.
Therefore, focus now shifts to the upcoming US retail sales numbers scheduled for Tuesday and the latest interest rate decision by the Federal Reserve. Economists polled by Reuters expect the data to show that the headline CPI declined from 1.7% in October to about 0.8% in November. Excluding food and energy, the sales are expected to have fallen from 1.7% to 1.0%.
The key mover for the AUD/USD pair will be FOMC decision. Based on the recent numbers, economists expect that the bank will sound a bit hawkish in a bid to control inflation. It will do this by continuing the process that started last month when it started to taper its asset purchases.
In the last meeting, the bank decided to slash the size of its quantitative easing (QE) by $15 billion. The Fed will also likely hint that interest rates will rise at a faster pace.
AUD/USD Forecast
The AUD/USD pair has held steady in the past few days. It has managed to move close to the 38.2% Fibonacci retracement level. Also, the pair has managed to move above the 25-day and 50-day moving average. The current level is important since the pair failed to move above it on Thursday. It has also formed a small inverted head and shoulders pattern.
Therefore, the pair will likely keep rising as bulls target the 50% Fibonacci retracement level at 0.7270. A drop below the chin of the double-top pattern at 0.7135 will invalidate the bullish view.
