Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7050.
- Add a stop-loss at 0.6950.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6970 and a take-profit at 0.6900.
- Add a stop-loss at 0.7050.
The AUD/USD price rose slightly as investors predicted that China’s government will boost spending to save its economy. It rose to a high of 0.700, the highest point since January 16th. It has jumped by more than 0.75% from its lowest point this week.
China economic challenges
The Australian dollar drifted upwards even after the weak economic data from China. The numbers revealed that the economy grew at the slowest pace in decades because of the government’s Covid measures. As part of its Covid-19 strategy, the government locked its borders and implemented large-scale lockdowns.
Further, data showed that the country’s population dropped by more than 800k people in 2022. Therefore, analysts believe that Beijing will implement several measures to stimulate the economy. It has already started.
On Tuesday, the government said that it will provide over $24 billion to cushion the real estate sector. Also, it has started allowing Australia to ship its coal to the country. These measures will benefit the Australian economy.
The AUD/USD pair will next react to important statements by Fed officials, including Raphael Bostic, James Williams, and Patrick Harker. These officials will provide more information about what to expect now that inflation is falling. Data published last Thursday showed that consumer inflation dropped in the past six straight months.
These statements will come a few hours after the US publishes the closely watched producer price index (PPI). Economists expect that the PPI also dropped in December, which is a positive sign for the economy.
The AUD/USD pair will also react to the latest retail sales data. These are important numbers because they provide more information about the state of the American consumer. Economists expect that retail sales dropped in December as interest rates remained at an elevated level. For example, car sales have dropped, pushing companies like Rivian and Tesla to slash their prices.
AUD/USD forecast
The AUD/USD pair has been in a bullish trend in the past few days. It has moved to the middle part of the ascending channel. The uptrend is also being supported by the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has continued rising. It is also above the Ichimoku cloud.
Therefore, the pair will likely continue rising as buyers target the key resistance level at 0.7020, the highest point since Monday.
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