Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7165.
- Add a stop-loss at 0.7050.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7085 and a take-profit at 0.7000.
- Add a take-profit at 0.7150.
The AUD/USD darted higher as investors started pricing in a rate hike by the Reserve Bank of Australia (RBA). the pair rose to 0.7115, which was the highest level since January 26th. It has risen by over 2% from its lowest level last month.
RBA Ends QE
The main catalyst for the AUD/USD pair is the RBA meeting that took place this week. On Tuesday, the RBA concluded its first meeting of the year and provided hints that it will start hiking interest rates later this year.
In the statement, the bank also said that it will end its yield curve control and quantitative easing (QE) program. In the QE program, the bank has been buying bonds worth billions of dollars every month. These funds have contributed to lower borrowing rates for both Australians and the government.
On interest rates, the bank said that it will only start hiking them when it is confident that the real inflation has moved between the 2% and 3% band. The bank expects that the headline inflation will remain above 3.70% this year and then start retreating in 2023.
Analysts expect the bank to be data-dependent going forward. Still, with most banks like the Fed and the Bank of England expected to hike, there is a likelihood that the RBA will move in the third quarter of this year. This explains why the AUD/USD pair rose sharply after the RBA decision.
The pair will next react to the latest American jobs numbers. ADP will publish the latest private payrolls numbers later today. Analysts expect these numbers to reveal that the country’s private sector created over 200k jobs in January. These numbers will come two days ahead of the official jobs data.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has made a spectacular recovery in the past few days. It has risen from a low of 0.6968 to a high of 0.7118. As it rose, the pair managed to move above the key resistance level at 0.7083, which was the lowest point in November. It also moved above the 25-day moving average and is along the upper side of the Bollinger Bands.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 0.7150. However, a drop to the middle line of the Bollinger Bands cannot be ruled out.
