Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6820.
- Add a stop-loss at 0.6680.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6650.
- Add a stop-loss at 0.6820.
The AUD/USD exchange rate retreated for six consecutive days, reaching a low of 0.6715, its lowest point since September 16. It has plunged by over 2.8% from its highest point this year as the US dollar index rallied.
Federal Reserve and RBA minutes
Thr AUD/USD pair plunged after the Reserve Bank of Australia (RBA) published minutes of the last monetary policy meeting.
Unlike most central banks, the RBA maintained interest rates unchanged at 4.35% and noted that inflation was still a big concern.
Minutes released on Tuesday showed that officials deliberated the potential impact of rate cuts and hikes. They also highlighted the ongoing inflation risks in the country, noting that it was the biggest focus.
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Analysts expect the central bank to maintain rates steady in the next meeting in November and potentially start cutting in December or in January.
The next important AUD/USD catalyst will be the upcoming Federal Reserve minutes, which will come out during the American session. These minutes will provide more information about what Fed officials deliberated during the meeting.
The pair will also react to several important statements by Fed officials like Tom Barkin, Philip Jefferson, and Lara Logan. These statements will be crucial because they will come a few days after the US published strong jobs numbers. The unemployment rate improved to 4.1% as the economy created over 254k jobs.
The other important data to watch will be Thursday’s Consumer Price Index (CPI) report. Economists expect the report to show that the headline inflation retreated to 2.3%, its lowest level in over two years.
These numbers will mean that inflation is heading in the right direction as it moves to the Federal Reserve’s target of 2.0%.
AUD/USD technical analysis
The AUD/USD pair peaked at 0.6941 last month and has pulled back sharply as the US dollar index bounced back. It retreated to a low of 0.6715, its lowest point since September 16.
The pair has dropped below the key support level at 0.6823, its highest level on August 29. It also fell below the key support at 0.6797, its highest level on July 12.
Meanwhile, the two lines of the MACD indicator have formed a bearish crossover indicator, while the Relative Strength Index (RSI) has moved below 50. Therefore, while the path of the least resistance is downward, the pair may rebound and retest the resistance point at 0.6800.
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