Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6900.
- Add a stop-loss at 0.7020.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7000 and a take-profit at 0.7050.
- Add a stop-loss at 0.6950.
The AUD/USD pair remained in a consolidation phase as investors focus on the recent minutes by the Reserve Bank of Australia (RBA). The Aussie is trading at 0.6975 against the US dollar, which is slightly above last Friday’s low of 0.6898.
Australia's Interest Rates to Keep Rising
The AUD/USD pair moved sideways after the RBA published its minutes on Tuesday. The minutes showed that officials are optimistic that higher interest rates were necessary to fight inflation. In that meeting, the bank caught many investors by surprise when they made a 0.50% rate hike. Analysts were expecting a 0.25% rate increase.
In a speech on Tuesday, RBA’s Philip Lowe said that rates will continue rising this year. He also cautioned that it was unlikely that the bank will hike rates by 4% as most analysts are expecting. In the statement, he said that hiking rates by 4% would have a negative impact on households and companies and would likely lead to a recession.
The AUD/USD is moving sideways as recent data point to falling commodity prices. The Bloomberg Commodity Index has risen by more than 4% from its highest point this month. Prices of key commodities like iron ore, platinum, and copper have all dropped by double-digits as investors worry about the ongoing demand dynamics.
Meanwhile, data from the United States showed that higher interest rates were having an impact on the country’s housing market. With mortgage rates rising, data showed that existing home sales dropped sharply in May. At the same time, the median house price rose to $409k because of the ongoing demand and supply imbalance.
The next key catalyst for the pair will be a testimony by Jerome Powell. He will address the current state of the economy and last week’s interest rate decision.
AUD/USD Forecast
The AUD/USD pair has been in a tight range in the past few days. It is trading at 0.6974, which is along the 25-day and 50-day moving averages while the MACD has moved to the neutral point. The pair has also formed a symmetrical triangle pattern that is shown in red. It is also along the standard pivot point.
Therefore, the pair will likely remain in this range ahead of Jerome Powell’s testimony. It will then resume the downward trend as bears target the key support level at 0.6900.
