Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.6930.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.6830 and a take-profit at 0.6750.
- Add a stop-loss at 0.6930.
The AUD/USD pair moved sideways as focus remains on the falling commodity prices and the strong American jobs data. The pair is trading at 0.6852, which is slightly above this month’s low of 0.7760. This price is significantly lower than June’s high of 0.7288.
Hawkish Fed Priced In
The AUD/USD pair has been in a consolidation mode in the past few weeks as investors continue watching the actions by the Reserve Bank of Australia (RBA) and the Federal Reserve.
In its meeting this month, the RBA decided to hike interest rates by 0.50% after delivering a similar one in the previous month. The bank has now hiked rates by 125 basis points and pointed to further hikes later this year.
The Federal Reserve will have its meeting in the final week of the month. Minutes by the FOMC that were published last week revealed that the committee was inclined to deliver another 0.75% rate hike this month.
The case for another bigger hike was supported by the relatively strong economic data by the Bureau of Labor Statistics. The numbers revealed that the economy’s labor market is substantially stronger than what analysts were expecting.
The economy added over 372k jobs in June, which was better than what analysts were expecting. In the same period, wages rose by more than 5% while the unemployment rate remained unchanged at 3.6%.
Therefore, with the labor market strengthening and with inflation soaring, analysts expect that the bank will continue hiking rates this month.
The AUD/USD is also ranging as investors focus on the relationship between China and Australia. China is seriously considering removing sanctions it has placed on most Australian goods. In a meeting the Chinese and Australian foreign ministers said that they will work on rebuilding trade relations. Notably, they did not provide a timetable of how this will happen.
AUD/USD Forecast
The AUD/USD pair has been rangebound in the past few weeks. The pair has managed to move above the important resistance level at 0.6831, which was the lowest level in May. It is also attempting to move above the 50-day moving average and the standard pivot point. It is also slightly below the descending trendline shown in blue.
Therefore, the pair will likely keep rising as bulls target the key resistance point at 0.6930, which is along the first resistance of the standard pivot point.
