Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7350.
- Add a stop-loss at 0.7200.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7260 and a take-profit at 0.7200.
- Add a stop-loss at 0.7330.
The AUD/USD pair was little changed on Thursday morning as the market reflected on Tuesday’s RBA decision and the commitment by Jerome Powell to hike interest rates in March. It is trading at 0.7265, where it has been since Wednesday.
Powell Commits to Rate Hikes
In a testimony to Congress on Wednesday, Jerome Powell hinted that the Federal Reserve was ready for lift-off in a bid to prevent the economy from overheating. The rate hikes will also be necessary to curb the rising inflation.
Data published last month showed that the American inflation surged to the lowest level in more than four decades. And the situation will likely get worse considering that logistical challenges are expected to push prices higher.
At the same time, energy prices have maintained a bullish trend this week. Natural gas price has jumped to record highs while crude oil has moved to the highest point in more than 7 years. Still, it is unlikely that the Fed’s gradual tightening will help to slow inflation.
The AUD/USD pair also reacted to the latest interest rate decision by the Reserve Bank of Australia (RBA). The bank decided to leave rates unchanged and hinted that it will only hike when it sees real inflation above 2%.
On Wednesday, Australia published strong GDP numbers. According to the Australia Bureau of Statistics (ABS), the economy bounced back in the fourth quarter even as the Omicron variant spread. The economy grew by 3.4% after easing by 1.9% in the previous quarter. It rose from 4.0% to 4.2% on a year-on-year basis. The bureau attributed this performance to strong consumer spending.
Later on Thursday, the pair will react to the latest initial jobless claims numbers from the US and the non-manufacturing PMI.
AUD/USD Forecast
The AUD/USD has wavered in the past few days. It is trading at 0.7273, which is slightly below this week’s high of 0.7285. The pair remains slightly above the 25-day and 50-day moving averages. It also seems like it has formed a double-top pattern, which is usually a bearish signal.
Still, there is a likelihood that the bullish trend will remain as long as the pair is above the two moving averages. If this happens, the next key reference level to watch will be at 0.7311, which is the highest level this year.
