Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6250.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6300 and a take-profit at 0.6200.
- Add a stop-loss at 0.6400.
The AUD/USD continued its recovery, helped by the recent US dollar crash and the rising commodity prices. The pair jumped to a multi-week high of 0.6330, up by over 3% from its lowest level this month.
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Federal Reserve rates decision
The AUD/USD pair rebounded after Donald Trump’s inauguration on Monday and his statements on tariffs. Trump did not immediately impose tariffs on any country as he had promised during the campaign.
Instead, he warned that such tariffs would be implemented in the next few weeks, a move many analysts expect to be a negotiating approach. Tariffs on imports would have major implications for the US economy, as prices would be passed on to consumers, leading to higher inflation.
The recent developments, together with the strong Chinese GDP numbers, has helped to push commodity prices higher. The Australian dollar is widely seen as a proxy for commodities.
Looking ahead, the next key catalysts for the AUD/USD pair will be the upcoming Federal Reserve interest rate decision. According to the CME FedWatch tool, economists expect the Fed to leave interest rates unchanged.
Fed officials have maintained their hawkish tone, pointing to the fairly stable labor market and steady inflation. This month's data showed that inflation rose to 2.9%, while the unemployment rate improved to 4.1%.
The AUD/USD pair will also react to other key economic numbers like the US consumer confidence and the personal consumption expenditure (PCE) inflation figure. It will also react to the upcoming fourth-quarter inflation report scheduled on Wednesday.
AUD/USD technical analysis
The AUD/USD pair has been in a slow uptrend after bottoming at 0.6130 earlier this month. It has moved slightly above the 25-day Exponential Moving Average.
The pair has formed an inverse head and shoulders chart pattern, a popular bullish reversal. Also, the MACD and the Relative Strength Index (RSI) indicators continued rising, a sign that it is gaining momentum.
It is now nearing the important resistance at 0.6350, a psychological point and the lowest swing on August 5. Therefore, a move above that level will point to more gains, with the next psychological level to watch being the psychological point at 0.6400. A drop below the 50-day moving average at 0.6265 will invalidate the bullish view.
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