Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6685.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6745 and a take-profit at 0.6675.
- Add a stop-loss at 0.6825.
The AUD/USD exchange rate continued its bullish trend after the Federal Reserve minutes on Wednesday. It has risen for five consecutive days, the longest trend since July this year. It was trading at 0.6755, its highest point since July 16.
Federal Reserve minutes ahead
The AUD/USD pair continued rising as bets that the Federal Reserve will start cutting interest rates in September rose.
These minutes showed that participants in the Federal Open Market Committee (FOMC) observed that if the numbers continued deteriorating, it would be necessary to slash interest rates in the next meeting.
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Hopes of Fed cuts intensified this week after the Bureay of Labor Statistics (BLS) showed that the labor market was softer than the previous numbers have shown. The official nonfarm payrolls retreated by 818,000 for the 12 months to May, the worst revision since 2009.
These numbers mean that the labor market has been worse than the Fed expected, which could push the Fed to take on more aggressive tone.
The other notable thing is that gasoline prices tumbled to the lowest level in six months, which could push inflation downwards. As a result, the Fed is now dealing with a situation where inflation is falling while the labor market is getting worse.
On the other hand, RBA minutes released this week showed that officials considered hiking interest rates in the last meeting. These minutes imply that the RBA will cut rates later than the Federal Reserve.
The next important data to watch on Thursday will be the US initial and continuing jobless claims and the flash manufacturing and services PMI numbers. These numbers will come a day before Jerome Powell’s statement at the Jackon Hole Symposium.
AUD/USD technical analysis
The Australian dollar continued its strong uptrend this week and reached a high of 0.6760 against the US dollar. The pair’s rally has been supported by the 50-period moving average, meaning that bulls are in control for now.
Additionally, the Relative Strength Index (RSI) has moved above the overbought point while the Average Directional Inded has risen to 42. The RSI measures the speed of change while the ADX is one of the most popular indicators to measure the strength of a trend.
Therefore, the pair will likely continue rising, wth the next target level being at 0.6800. A move above that level will point to more gains. The other scenario is where the pair retests 0.6800 and then resumes a downtrend on profit-taking.
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