Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6300.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 0.6350 and a take-profit at 0.6250.
- Add a stop-loss at 0.6450.
The AUD/USD pair remained in a consolidation phase after the latest interest rate decision by the RBA. It was trading at 0.6386, which was much lower than last week’s high of 0.6525. Focus now shifts to the upcoming monetary policy meeting by the Federal Reserve.
FOMC decision ahead
The Australian dollar moved sideways after the latest interest rate decision by the Reserve Bank of Australia. After finishing its two-day meeting, the bank decided to hike interest rates by 0.25% for the second straight month. It pushed the official cash rate (OCR) to 2.85% and hinted that more hikes were coming.
The RBA attributed the tightening of monetary policy to the soaring inflation. Data published last week showed that the headline consumer price index (CPI) rose to 7.3% in the September quarter. The bank attributed this trend to external factors like soaring energy prices and soaring demand in the country. It now expects that inflation will average 4.75% in 2023 and 3% in 2024.
The Australian economy is doing well, with the unemployment rate has dropped to 3.5%. Wages have continued rising although they remain lower than that of most developed countries. The decision to hike rates by 0.25% was because of strong headwinds like house prices and the uncertainty of the global economy.
The AUD/USD pair will next react to the latest Federal Open Market Committee (FOMC) interest rate decision. Economists expect that the Fed will continue hiking interest rates to counter the elevated inflation. Data published in October showed that American inflation rose by 8.3% in September.
The Fed will likely continue hiking interest rates by another giant 0.75% for the third straight meeting. Therefore, the key thing to watch will be the bank’s statement on future hikes. Investors will watch signs that the bank is about to pivot its hikes.
AUD/USD forecast
The Australian dollar pulled back slightly after the RBA decision and ahead of the upcoming FOMC meeting. It moved below the standard pivot point on the four-hour chart. It has moved to the 25-day moving average and is slightly above the key support at 0.6350, which was the highest point on 14th October.
The pair has formed what looks like an inverted head and shoulders pattern. It will likely remain under pressure and then bounce back after the Fed decision. This could see it retest last week’s high of 0.6500.
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