Bearish View
- Sell the AUD/USD and a take-profit at 0.7200.
- Add a stop-loss at 0.7140.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7100 and a take-profit at 0.7200.
- Add a stop-loss at 0.7035.
The AUD/USD pair's downward trend continued on Monday morning as investors repositioned for the upcoming interest rate decisions by the Reserve Bank of Australia (RBA) and the Federal Reserve. The pair is trading at 0.7060, which is close to its lowest level last week. It has collapsed by almost 8% from the highest point in April.
Action-Packed Week
The AUD/USD pair will have a busy week as the Fed and the RBA publish their interest rate decision. The RBA is expected to sound a bit hawkish when it completes its meeting on Tuesday. The bank will likely leave its interest rate unchanged and then hint that it will deliver its first interest rate hike in June.
The decision will come a few days after the Australian Bureau of Statistics (ABS) showed that the country’s consumer inflation jumped. The headline CPI rose by 5.1% in Q1, which was the highest level in 20 years. It was also significantly higher than the RBA target of 2.0%.
On Wednesday, the ABS will publish the preliminary consumer inflation data. Analysts believe that the country’s sales declined by 0.5% in March as prices jumped. Retail sales are so important because they provide guidance of consumer spending.
The Fed, on the other hand, will complete its monetary policy meeting on Wednesday. Economists expect that the Fed will deliver a more hawkish interest rate hike. Going by the recent statements by Fed officials, the rate hike will be 0.50%. Most importantly, the bank will likely start its quantitative tightening (QT) policy by reducing its balance sheet by $75 billion per month.
The AUD/USD will also react to the latest non-farm payrolls (NFP) data that will come out on Friday. Economists expect that the economy added 361k jobs in April while the unemployment rate fell to 3.5%.
AUD/USD Forecast
The AUD/USD pair has been in a strong bearish trend in the past few days. Along the way, the pair has formed a descending channel pattern that is shown in orange. It is now slightly above the lower side of the channel. At the same time, the pair has moved slightly below the 25-day moving average while the Stochastic Oscillator and the Relative Strength Index (RSI) have pointed downwards.
Therefore, the pair will likely keep falling ahead of the RBA decision as bears target the support at 0.7000. It will then likely retest the upper side of the channel towards or after the RBA decision.
