Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6650.
- Add a stop-loss at 0.6570.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6585 and a take-profit at 0.6500.
- Add a stop-loss at 0.6650.
The AUD/USD pair bounced back as last week’s sell-off took a breather. After tumbling to 0.6575 after the red-hot jobs report, the pair bounced back to 0.6605 as traders focused on the Federal Reserve decision.
There will be no major economic event from the US and Australia on Tuesday. Therefore, traders will focus on the price action in the commodities market and Wednesday’s Fed meeting.
Most commodities have crawled back this week, which is a positive thing for the Aussie since Australia is a big exporter. Natural gas, gold, copper, and iron ore rebounded on Monday and continued the trend. This price action is mostly because there are signs that the Chinese economy us recovering.
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The Federal Reserve will start its monthly monetary policy meeting later on Tuesday and deliver the decision on Wednesday. This will be a notable meeting because the committee will publish the dot plot, which provides guidance on when the Fed will start slashing rates.
Analysts have mixed opinion on when these cuts will start. In a note, analysts at Citigroup said that they expect the cuts will start in the September meeting. Standard Chartered said that the bank will start to cut in July while JP Morgan sees it slashing in November.
This meeting will come a few days after the US released strong jobs numbers on Friday. According to the BLS, the economy added over 272k jobs in May while wages continued rising by 4.0%. A few days before that, the ISM published a weak manufacturing PMI report.
AUD/USD technical analysis
The AUD/USD pair crashed to a multi-week low of 0.6575 after the strong US jobs report on Friday. As it dropped, it moved below the crucial support at 0.6591, its lowest swing on May 24th and May 30th.
The pair has now rebounded and moved to the Woodie pivot point. However, it has remained below the 50-period moving average and is between the 23.6% and 38.2% Fibonacci Retracement point.
The Awesome Oscillator has remained below the neutral point and has turned green. Therefore, the pair’s outlook is neutral for now since it is in a psychologically-important level. More upside could see it retest the next resistance level at 0.6650.
The alternative scenario is where the pair resumes the bearish trend and retests last week’s low at 0.6576.
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