Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7445.
- Add a stop-loss at 0.7350.
- Timeline: 1 day.
Bearish View
- Set a sell-stop at 0.7350 and a take-profit at 0.7300.
- Add a stop-loss at 0.7440.
The AUD/USD pair rose to the highest level since March 7th as investors predicted that the Reserve Bank of Australia (RBA) will also embrace a hawkish tone in the next few months. The pair rose to a high of 0.7413, which was about 3.50% above the lowest level this month.
Hawkish RBA?
The AUD/USD has rebounded as investors expect that the RBA will turn its market sentiment in the coming months. In its meeting earlier this month, the bank reiterated that it will only start tightening when the real inflation remained between 2% and 3%. In the same meeting, the bank said that it expects that the headline inflation will remain above 3% later this year.
At the same time, the Australian jobs data published on Thursday showed that the labor market was tightening. The unemployment rate has dropped to the lowest level in years while wage growth has held steady. Therefore, while the RBA has maintained a relatively dovish stance, analysts expect that it will change its mind.
Another catalyst for the AUD/USD pair is that commodity prices have held steady, meaning that demand for the Australian dollar will remain as exports rise.
Meanwhile, the pair also rose despite of the hawkish statement delivered by the Federal Reserve last week. The bank decided to hike interest rates by 0.25% as most analysts were expecting. It also signaled that it will hike interest rates in all the remaining meetings of the year. If this happens, it means that this year will see the most rate hikes in years.
Therefore, the pair rose because the situation was already priced in by the market. Indeed, other assets that would typically drop after the hawkish Fed like cryptocurrencies and stocks rose as well.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has made a strong comeback in the past few days. As a result, it has formed a v-shaped recovery and moved above the 25-day and 50-day moving averages. It is also approaching the key resistance level at 0.7443, which was the highest point on March 2022.
The pair has also moved above the 25-day and 50-day moving averages while the Relative Strength Index has pointed upwards. Therefore, the pair will likely keep rising on Monday as bulls target the key resistance at 0.7445.
