Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.7000.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6910 and a take-profit at 0.700.
- Add a stop-loss at 0.6800.
The AUD/USD currency pair surged to its highest point since February 2023 as key Australian commodities jumped after China unveiled a series of stimulus measures to boost its economy. The pair rose to a high of 0.6938, a 9.30% increase from the lowest point this year.
China stimulus and RBA
The AUD/USD pair had three main catalysts last week. The first one came on Tuesday when the Reserve Bank of Australia (RBA) delivered a relatively dovish interest rate decision. In it, the bank decided to leave interest rates unchanged at 4.30%.
The bank insisted that inflation was still stubbornly high. However, unlike other meetings, the committee did not hint that it will hike interest rates if prices continued rising.
Therefore, with most central banks cutting rates, analysts expect that the bank will inevitably start slashing them either later this year or in early 202, which explains why the Aussie has risen.
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The AUD/USD pair rebounded after the Chinese government unveiled a series of stimulus measures to boost the economy. The first stimulus came from the central bank, which reduced a bank reserve level that will ultimately unlock over $100 billion in funds.
Beijing also hinted that it will provide over $140 billion in funds in its biggest stimulus measures since the start of the pandemic.
As a result, most commodities that Australia ships to China like iron ore and coal had their best-performance in months, which will benefit the Aussie.
The other major catalyst for the AUD/USD pair was last Friday’s US personal consumption expenditure (PCE) data. These numbers confirmed that the country’s inflation continued falling last month.
Therefore, there are rising odds that the Federal Reserve will continue cutting interest rates, especially if the labor market continues worsening.
AUD/USD technical analysis
The AUD/USD pair continued its bullish trend last week, soaring to a high of 0.6938, its highest level since February last year. It has jumped above the key resistance level at 0.6870, its highest level in December last year.
The pair rose above the Ichimoku cloud indicator while oscillators like the Relative Strength Index (RSI) and the Commodity Channel Index (CCI) have tilted upwards.
Therefore, while the bullish trend will continue, there is a likelihood that the rally will take a breather, with the next point to watch being the psychological point at 0.6800. A break above last week’s high at 0.6938 will point to more upside.
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