Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7346.
- Add a stop-loss at 0.7170.
- Timeline: 1 day.
Bearish View
- Set a sell-stop at 0.7170 and a take-profit at 0.7100.
- Add a stop-loss at 0.7250.
The AUD/USD pair held steady in the overnight session as investors focused on the interest rate decision by the Federal Reserve and the Reserve Bank of Australia. It rose to a high of 0.7236, which is slightly above this month’s low of 0.7030.
RBA and Fed Hikes
The AUD/USD has been in the spotlight this week as investors eyed the interest rate decisions by the Federal Reserve and the Reserve Bank of Australia (RBA).
On Tuesday morning, the RBA decided to implement its first interest hike in about a decade. The 0.25% rate hike was higher than what most analysts were expecting. The bank also signaled that it would continue hiking rates in a bid to slow inflation.
And on Wednesday, the Fed decide to implement its first back-to-back rate hike since 2006. It did that by hiking interest rates by 0.50%, which was the biggest increase since 2002. In its accompanying statement, the bank said that it will continue hiking rates as it targets its neutral rate of between 2% and 3%.
The bank said that the rates were necessary considering that the country’s inflation has risen to the highest level in over 40 years. In fact, the prices of most items has risen sharply in the past few months.
However, the biggest risk for both the Fed and the RBA is that there will be a hard landing in the two economies. Such signs have started to happen, especially in the United States, where pending home sales have been in a strong downward trend.
Data published on Wednesday also showed that the country’s labor market was easing. The economy’s private sector added just 240k jobs in April, the lowest increase in years. The official numbers will come out on Friday.
AUD/USD Forecast
The AUD/USD pointed upwards after the RBA interest rate decision. It rose to a high of 0.7230, which was the highest level since April 25th. It managed to move above the important resistance at 0.7170, which was the highest level on April 29th. It has also crossed the 25-day and 50-day moving averages while the MACD has moved slightly above the neutral level.
Therefore, the pair will likely keep rising as bulls target the important resistance at 0.7300. A drop below the support at 0.7170 will invalidate the bullish view.
