Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6415.
- Add a stop-loss at 0.6290.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6290.
- Add a stop-loss at 0.6415.
The AUD/USD exchange rate moved sideways and hovered at its highest level since December 17 last year. It rose to a high of 0.6350, up by 4.30% from its lowest level this year after the Fed minutes, RBA minutes, and Australian jobs data.
The AUD/USD pair has held steady this week as the US dollar index (DXY) retreat continued. It has dropped to $106.2 from the year-to-date high of $110 even as risks, especially on tariffs, continued rising.
The pair reacted to the latest Federal Reserve minutes. Fed officials warned that interest rates will remain higher for longer because of the rising inflation. They indirectly blamed the proposed tariffs by Donald Trump for higher inflation.
Trump has warned that it will impose reciprocal tariffs later this year. Such a move would likely lead to higher prices for American consumers. This week, he floated the idea of a 25% tariff on key products like automobile and pharmaceuticals. He has also said that the US will implement a 25% tariff on imported steel and aluminum.
Trump hopes that the threat of tariffs will push more companies to the United States. However, this will likely not happen as the US has higher manufacturing costs, especially in the labor market. Instead, companies will opt to hike prices, leading to higher inflation.
The AUD/USD pair also reacted to the Reserve Bank of Australia (RBA) decision. It decided to cut rates for the first time since 2020, citing the cooling inflation. Economists expect the RBA to deliver at least two more cuts this year.
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Economic data released earlier on Thursday showed that the labor market remained tight in Australia. The unemployment rate remained at 4.0% as the economy added over 20,000 during the month.
AUD/USD technical analysis
The daily chart shows that the AUD/USD pair has continued rising in the past few weeks. It rallied and crossed the 23.6% Fibonacci Retracement level at 0.6285.
The pair has rallied above the 50-day and 25-day Exponential Moving Averages (EMA), which are about to cross each other. Also, the MACD indicator has continued rising, and the pair has formed a bullish flag pattern.
Therefore, the pair will likely keep rising as bulls target the 38.2% Fibonacci Retracement point at 0.6415. A drop below the 25-day moving average at 0.6290 will invalidate the bullish view.
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