Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6620.
- Add a stop-loss at 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6730 and a take-profit at 0.6825.
- Add a stop-loss at 0.6650.
The AUD/USD exchange rate drifted downwards on Friday after a hawkish statement by a Federal Reserve official. It dropped to a low of 0.6700 on Monday as it erased most of the gains it made last week when it jumped to a high of 0.0.6806.
Fed decision uncertainty
The main driver of the AUD/USD pair is the next actions of the Federal Reserve after several months of hiking interest rates. These concerns have pushed investors and traders to embrace more risk-on sentiment in the past few weeks. As a result, risky assets like stocks and cryptocurrencies have risen while the US dollar index has retreated to the lowest level since January.
The case for a more dovish Fed continued this month after several encouraging economic data. For example, the number of job openings has dropped sharply recently as several large employers like Amazon, Microsoft, and Google announced large layoffs in the first quarter.
At the same time, inflation has continued dropping in the past few months. In March, the headline consumer inflation dropped to the lowest level since 2021. Retail sales, manufacturing, and non-manufacturing PMI figures also declined in March.
However, the pair dived on Friday after a Fed official reiterated that the bank will continue hiking interest rates. In a statement, Christopher Waller, a voting member of the committee said that the bank should continue hiking rates since inflation remains stubbornly high.
The Fed could decide to maintain this hawkish tone to prevent a situation where stocks and other assets jump, pushing inflation higher.
The next key catalyst for the AUD/USD pair will be the upcoming RBA minutes scheduled for Tuesday. These minutes will provide more details about what happened in this month’s meeting. It will also react to the upcoming US bank earnings.
AUD/USD technical analysis
The AUD/USD pair jumped to a high of 0.680 last week and then quickly retreated to 0.6700. It has moved to the lower side of the ascending channel shown in orange. The pair has also moved slightly below the 50-period moving average and the lower side of the Bollinger Bands. It has dropped to the standard pivot point.
Therefore, the pair will likely continue falling on Monday as the seller targets the month-to-date low of 0.6622 The stop-loss of this trade will be at 0.6750.
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