Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.7360.
- Add a stop-loss at 0.7550.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7455 and a take-profit at 0.7525.
- Add a stop-loss at 0.7360.
The AUD/USD pair rose to the highest level since November 4 2021 even after the hawkish statement by Jerome Powell. It is trading at 0.7436, which is about 6.8% above the lowest level this year.
Hawkish Fed Chair
The AUD/USD pair rose in the overnight session as the US dollar and volatility declined. The VIX, which is a good measure of volatility, declined by over 8% while American equities bounced back. Similarly, cryptocurrencies like Bitcoin and Ethereum also rose.
On Monday, Jerome Powell delivered relatively hawkish statements. Addressing a business panel, he said that the bank will be as aggressive as possible in a bid to keep inflation in check. For example, he said that he will be supportive of hiking interest rates by half a percentage point in the next meeting that is scheduled in May.
In last week’s meeting, the Federal Open Market Committee said that inflation was growing at a faster pace than expected. They also said that the situation will continue because of the rising commodity prices and the fact that supply chains are being disrupted.
The AUD/USD pair rose likely because analysts expect that the Reserve Bank of Australia (RBA) will likely turn hawkish in the coming meeting. In its February meeting, the bank decided to leave interest rates unchanged and end its QE program. It said that it will maintain rates in the current level until real inflation remained above 2%.
Therefore, with its peer banks like the Fed, Bank of Canada, and Bank of England hiking rates, analysts believe that the RBA will also do the same. Besides, Australia’s headline inflation remains at elevated levels while the unemployment rate has been in a downward trend.
There will be no data from Australia today. The key catalysts will be a statement by Jerome Powell and US new home sales numbers.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bullish trend in the past few days. And on Tuesday, it managed to move above the key resistance level of 0.7440, which was the highest point this year. It also moved above the 25-day and 50-day exponential moving averages while the MACD has continued rising.
Therefore, while the overall outlook is bullish, a pullback will likely happen since the pair has formed what looks like a double-top pattern. This could see it retest the support at 0.7360. Still, a move above 0.7450 will mean that bulls have prevailed.
