Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss of 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6720 and a take-profit at 0.6835.
- Add a stop-loss at 0.6650.
The AUD/USD price remained in a consolidation phase on Monday morning as the focus shifted to the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The pair was trading at 0.6700, which was between its lowest and highest levels in March.
RBA interest rate decision
The biggest catalyst for the AUD/USD pair will be the upcoming interest rate decision by the RBA scheduled for Tuesday.
Economists are divided about whether the bank will hike rates again or change its tune. The median estimate by analysts polled by Reuters is that the bank will hike by 0.25% to 3.85%. Another set of 16 analysts polled by Bloomberg showed that the bank will leave interest rates unchanged at 3.60%.
The consensus among traders and analysts is that the RBA is nearing the end of its hiking even as inflation remains at an elevated level. Data published last week showed that the country’s inflation rate came in at 6.8% in February after rising by 7.4% in the previous month.
The RBA, like other central banks, has become increasingly data-dependent. In a recent statement, Governor Philip Lowe said that the bank was focusing on the unemployment rate, inflation, retail spending, and business conditions. In a note, an analyst at KPMG said:
“Given inflation is still in the uncomfortably high territory, and economic conditions have remained robust amid a tight labor market, KPMG believes the RBA will follow their international counterparts and opt for another 25 basis point increase.”
The AUD/USD pair reacted mildly to the latest economic data from Australia. Data published by S&P Global showed that the manufacturing PMI declined from 50.5 in February to 48.7 in March. Later on Monday, S&P and ISM will publish the latest US PMI numbers.
AUD/USD technical analysis
The AUD/USD pair attempted to recover in April after dropping to a low of 0.6524 on March 8. This recovery found strong resistance at 0.6752 on March 22. It has formed an ascending channel shown in green and is now approaching the lower side. The pair is trading at the 50-period moving average while the Relative Strength Index has pointed downwards.
Therefore, the pair will likely have a bearish breakdown as the US dollar index rises. The next key reference level to watch will be 0.6625 (March 27 low) and the year-to-date low of 0.6566.
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