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Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6450 and a take-profit at 0.6400.
- Add a stop-loss at 0.6550.
The Australian dollar rose to the highest level in more than three weeks as the greenback retreated. The AUD/USD exchange rate rose to a high of 0.6523, higher than the year-to-date low of 0.6376.
US and Australia economic slowdown
Economic data published this week showed that the US and Australian economies were slowing down. Australia is slowing mostly because of internal and external factors. The most important external factor is the ongoing weakness in China, its biggest partner.
Data published on Wednesday revealed that the housing sector is slowing. Building consents in July dropped by 5.2% in July after growing by 3.4% in June. Building approvals dropped by 6.4% in July. Construction work done rose by just 0.4% in the second quarter.
Therefore, these numbers mean that the Reserve Bank of Australia (RBA) will continue pausing its rates in its meeting next week. The bank left rates unchanged at 4.10% in its most recent meeting.
The AUD/USD pair also rose slightly after the relatively weak US economic numbers. According to ADP, the private sector added 177k in August, down from the median estimate of 195k. Its report showed that the economy added 371k in July.
Additional data revealed that the American economy expanded by 2.1% in Q2, down from the first estimate of 2.4%. The economy grew by 2.0% in the first quarter. Most importantly, the core PCE index dropped from 4.90% to 3.70%.
These numbers came a day after another report by Conference Board revealed that consumer confidence dropped to 106 in August from the previous 117. Therefore, the Fed will likely pause its interest rates in its September meeting.
AUD/USD forecast
The AUD/USD pair has been in a consolidation phase in the past few days. As it rose, the pair rose above the important resistance point at 0.6487, the highest point on August 24th. The pair rose slightly above the 25-period moving average while the Relative Strength Index (RSI) has formed a bullish divergence pattern.
Therefore, the pair will likely remain in this range on Thursday as traders wait for the PCE and US non-farm payrolls (NFP) data. The PCE, which will come out on Thursday is expected to show that inflation rose by 3.3% in July. The key support and resistance levels to watch will be at 0.6430 and 0.6600, respectively.
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