Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6760.
- Add a stop-loss at 0.6600.
- Timeline: 1 day.
Bearish view
- Set a sell-stop at 0.6650 and a take-profit at 0.6580.
- Add a stop-loss at 0.6750.
The Australian dollar reacted mildly to the interest rate decision by the Federal Reserve. The AUD/USD price was trading at 0.6670, where it has been in the past few days.
Fed and RBA decisions
The Federal Reserve and the Reserve Bank of Australia (RBA) delivered their interest rate decisions this week. On Tuesday, the RBA decided to hike interest rates by 0.25% after leaving them unchanged in the past three straight meetings.
It cited the fact that inflation was still stubbornly high and the unemployment rate at the lowest level in over 50 years. The RBA also hinted that it will continue hiking interest rate rates in the coming months.
The Federal Reserve, on the other hand, did what most analysts were expecting. In its decision, the bank decided to hike interest rates by 0.25%. It also committed to continuing with its quantitative tightening process by reducing the size of the balance sheet by $95 billion per month.
The Fed, however, pointed that the tightening phase was ending considering that interest rates have already jumped by over 5% in the past few months. The risks of an aggressive monetary policy is that it could lead to more challenges for the economy going forward.
These impacts have started to emerge. The commercial real estate industry has continued to bleed, with most properties losing value amid low occupancy rates. Further, the regional banking crisis continued after the collapse of First Republic Bank, a company that catered to wealthy individuals. Several other regional banks are on the verge of collapse.
The AUD/USD pair will next react to the upcoming non-farm payrolls (NFP). Economists expect the data to show that the unemployment rate remained at 3.5% in April as the economy added 185k jobs. A report by ADP showed that the American economy added over 296k jobs in April.
AUD/USD technical analysis
The AUD/USD exchange rate remained in a tight range after the latest Fed and RBA interest rate decision. The pair was trading at 0.6665, where it has been in the past few days.
The pair is consolidating at the 25-day and 50-day exponential moving averages while the Stochastic Oscillator has moved below the neutral point. It remains above the important support level at 0.6562.
Therefore, the pair will likely remain in this range on Thursday. The next key support and resistance levels to watch will be at 0.6600 and 0.6800.
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