Bullish view
- Set a buy-stop at 0.7250 and a take-profit at 0.7300.
- Add a stop-loss at 0.7200.
- Timeline: 1 day.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.7100.
- Add a stop-loss at 0.7280.
The AUD/USD pair continued after the surprise interest rate hike by the Reserve Bank of Australia (RBA). The pair is trading at 0.7220, which is close to its month-to-date high of 0.7287. It has risen by over 5.66% from its lowest point in May.
RBA rate hike
In 2021, the RBA spent most of the year talking about transitory inflation. At the time, it signaled that it will hike interest rates either in 2023 or 2024. Therefore, the bank caught many analysts by surprise when it reversed its dovish tone in May.
It implemented its first 0.25% rate hike in May. And this week, the RBA surprised investors by hiking interest rates by 0.50%. This was the first time it made a 0.50% hike since 2000. Also, it was the first time that it made a back-to-back rate hike since 2010.
Most importantly, the RBA signaled that it will deliver more rate hikes this year as it continues battling the soaring inflation. Analysts believe that it will push rates to 1.35% in its July meeting. Still, the risk is that an aggressive tightening will lead to a major deterioration of the economy.
For example, if banks fully pass rates to borrowers, homeowners will need to pay $295 extra per month for a $750k mortgage. This could be a big hit to individuals considering that wage growth has been a bit weak this year.
With the RBA done, the next key data to watch will be the upcoming American inflation data that is scheduled on Friday. Analysts expect the data to show that the country’s inflation moderated slightly in May this year.
AUD/USD forecast
The AUD/USD pair has been in a strong bullish trend since mid-June because of the strong US dollar. It has risen by more than 5.8% in this period. At the same time, the pair formed an ascending channel pattern that is shown in black. On Tuesday, it had a false breakout after the RBA decision.
The pair has moved slightly above the 25-day and 50-day moving averages while the MACD is approaching the neutral point. It is slightly below the 50% retracement point.
Therefore, there is a likelihood that the pair will continue the bullish trend since it is stuck above the two MAs. If this happens, the next key resistance will be at 0.7300
