Bullish view
- Buy the AUD/USD pair and a take-profit at 0.6700.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6665.
The AUD/USD exchange rate pulled back even after the Reserve Bank of Australia (RBA) delivered a hawkish pause on Tuesday. After soaring to 0.6650 last week, the pair has retreated to 0.6590, its lowest point since May 3rd.
RBA and Fed next moves
The RBA delivered another rate pause in its monetary policy meeting this week. It left interest rates unchanged at 4.35% as was widely expected. It has maintained rates at the current level in the past six meetings.
In a statement, Michelle Bullock, the bank’s governor, noted that inflation was still stubbornly higher than its target of 2.0%. She expects that the bank will start cutting rates in 2025, much later than other central banks. The RBA expects that inflation will rise to 3.8% in Q2 from 3.6% in Q1.
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The bank’s policy guidance is different from that of the Federal Reserve. In its meeting last week, the bank left rates between 5.25% and 5.50%. Jerome Powell hinted that the bank will start cutting rates later this year.
That view was confirmed by the weak US economic numbers. Consumer confidence slumped to its lowest level since 2022 while the unemployment rate rose to 3.9%. The manufacturing and services PMI numbers dropped to the contraction zone.
There will be no important economic numbers from Australia and the US on Wednesday. The only catalyst that will move the AUD/USD pair will be a speech by Philip Jefferson, the Vice Chair of the Board of Governors of the Federal Reserve.
AUD/USD technical analysis
The Australian dollar started a bull run after forming a long-legged doji pattern on April 19th. In most cases, this is one of the most popular reversal patterns. It has now risen and crossed the 50-day moving average.
The pair rose and found a strong resistance point at 0.6650, where it has failed to move above since May 8th. This price was also the upper side of the inverse head and shoulders pattern that has been forming. It is also hovering at the first resistance of the Woodie pivot point.
The Average Directional Index (ADX) has pointed downwards, showing that the bullish momentum has faded. Therefore, the pair will likely remain in this range on Wednesday because there will be no major economic events.
More upside will only be confirmed if the pair moves above the crucial resistance at 0.6650. If that happens, it will rise to the psychological point at 0.6700. The alternative scenario is where it retests the 50-day moving average at 0.6535.
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