Bearish View
- Set a sell-stop at 0.6800 and a take-profit at 0.6700.
- Add a stop-loss at 0.6800.
- Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.6850 and a take-profit at 0.6900.
Add a stop-loss at 0.6800.
The AUD/USD price is holding steady after last week’s crash. The pair is trading at 0.6815, which is significantly higher than last week’s low of 0.6767. This price is about 6.46% below the highest point in June this year.
RBA Decision Ahead
The Australian dollar has been in a strong bearish trend in the past few weeks even after the Reserve Bank of Australia (RBA) turned extremely hawkish. In June, the bank caught many investors by surprise as it decided to hike interest rates by 0.50%. This was the biggest rate hike by the bank in decades.
The next key catalyst for the AUD/USD will be the upcoming interest rate decision that is scheduled for Tuesday. Analysts expect that the bank will intensify its battle against inflation by hiking interest rates by 0.50%. Most importantly, they believe that the bank will signal that it will deliver a similar hike in August.
These rate hikes have had an impact on the Australian economy. For example, the cost of government borrowing has risen substantially, with the yield of the 10-year rising to 3.47%. Similarly, consumers are paying more money for mortgages.
Banks like CBA, NAB, and Westpac have hiked the cost of fixed mortgages. According to RateCity, over 70 lenders have boosted their rates. This is affecting the economy, with data published on Monday showing that building approvals dropped sharply in May.
In a recent statement, RBA’s Philip Lowe warned that the country’s inflation will keep rising in the coming months. The bank expects that inflation will rise to 7% by end of this year. This is a significantly higher level considering that the bank has an inflation target of 2.0%.
The AUD/USD pair will also experience some low volume on Monday since American markets will be closed for the Independence Day celebration.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair formed a symmetrical triangle pattern last month. It then managed to have a bearish breakout last Friday as the dollar strength continued. It fell to a low of 0.6762, which was the lowest level this year.
The pair has now pulled back as investors buy the dips. It remains below the 25-day and 50-day moving averages and the lower side of the triangle pattern.
Therefore, despite the pullback, there is a likelihood that the pair will resume the bearish trend as bears target the key psychological level at 0.6750.
