Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.700.
- Add a stop-loss at 0.7170.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7125 and a take-profit at 0.7200.
- Add a stop-loss at 0.7050.
The AUD/USD pair is hovering near the lowest level in February this year as market participants focus on the recent RBA and Fed decisions and the upcoming Australian election. It is trading at 0.7076, which is slightly above last week’s low of 0.7031.
Upcoming Australian Election
The AUD/USD declined as investors reacted to the heated debate between Scott Morrison and Anthony Albanese. The two party leaders deliberated on various issues such as inflation and the labor market.
Ahead of the debate, a poll by the Australian Financial Review showed that Labor could win if the numbers hold. They now have a 35% while Greens are at 12%. As a result, in total, Labor has a preferred lead of 52% to 40% of the Coalition. The election will happen on May 21st.
The pair also declined as investors reacted to the recent economic numbers from the US and the Fed decision. On Friday, data by the American labor department showed that the labor market continued to strengthen in April.
The economy added over 428k jobs in April after adding an adjusted 391k in the previous month. The unemployment rate remained at 3.6%, meaning that the economy is in a full environment situation.
The Federal Reserve also sounded hawkish when it decided to hike interest rates by 0.50%. The rate hike was in line with what analysts were expecting. It also signaled that it will keep hiking interest rates and start a quantitative tightening process.
The hawkish Fed was in line with what the Reserve Bank of Australia did a day before. The bank surprised investors when it delivered a 0.25% hike. Most analysts were expecting the Fed to hike interest rates by just 0.15%.
Looking ahead, the key catalysts to watch will be the upcoming US inflation and Australia’s retail sales numbers.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a bearish trend in the past few days. The pair managed to move slightly below the important support at 0.7170, which was the lowest level on March 15th. It has declined below the 25-day and 50-day moving averages while the MACD has moved below the neutral level.
Therefore, the pair will likely keep falling in the near term. More declines will be confirmed when the pair drops below the key support at 0.7030.
