Bearish View
- Sell the AUD/USD and set a take-profit at 0.6970.
- Add a stop-loss at 0.7145.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7100 and a take-profit at 0.7150.
- Add a stop-loss at 0.7050.
The AUD/USD pair attempted to crawl back on Monday morning as investors continued to focus on last Friday’s stellar jobs numbers from the United States. The pair is trading at 0.7075 as focus shifts to the upcoming US inflation data.
Fed and RBA Convergence
The AUD/USD pair declined sharply on Friday after the US published strong jobs numbers. The data revealed that the American economy did well in January even as the unemployment rate rose. The economy added more than 467k jobs in January, which was better than what analysts were expecting.
The number was also better - by far - than the estimate by ADP, which predicted that the economy lost more than 300k jobs. Most importantly, the BLS upgraded the number of jobs that the economy added in January.
Focus now shifts to the American inflation numbers that come on Thursday. Economists expect that the data will show that the headline consumer price index (CPI) rose to 7.3% while core CPI rose to 5.9%. If analysts are accurate, it means that the country’s inflation will be the highest it has been in more than 40 years.
Therefore, with the labour market being strong and inflation rising, the Fed will have the motivation to be more aggressive when it delivers its rate decision in March.
The same trend is happening in Australia, where the Reserve Bank of Australia (RBA) delivered its decision last week. The bank decided to leave its interest rate unchanged at 0.10%. Most importantly, the bank decided to end its quantitative easing (QE).
In a later speech, the bank’s governor noted that it will likely increase interest rates if the data continue being supportive. Numbers have been relatively strong. Inflation has risen and the unemployment rate has fallen.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair declined sharply last Friday after the strong American jobs numbers. The pair is currently between the lower and middle lines of the Donchian Channels while the Relative Strength Index (RSI) has tilted lower.
Further, the pair is slightly below the low the 25-day moving average and a few pips above the standard pivot point.
Therefore, on Monday, the pair will likely continue falling as bears target the key support level at 0.6970. On the flip side, a move above the key resistance at 0.7100 will invalidate the bearish view.
