Bearish View
Set a sell-stop at 0.7160 and a take-profit at 0.7100.
Add a stop-loss at 0.7240.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7210 and a take-profit at 0.7300.
Add a stop-loss at 0.7150.
The AUD/USD pair moved in a tight range on Monday morning as investors assessed the impact of the American jobs data on the Fed policy. Also, the market is watching the impact of the rising number of Covid-19 cases in the US and Australia.
Fed and RBA Policies
The Federal Reserve and Reserve Bank of Australia (RBA) have moved relatively in sync in the past few months.
The two central banks are still implementing quantitative easing (QE) policies in a bid to support their respective economies. Unlike the Bank of England (BOE) and the Reserve Bank of New Zealand (RBNZ), the two banks have not yet started hiking interest rates.
This trend could change this year even as the two countries see a sharp increase in the number of Covid cases. In the US, the number of new cases on Sunday was over 600k while more than 1,200 people died. In Australia, the number of daily cases has jumped to over 70,000. However, on the positive side, the mortality rate is significantly low considering that the Omicron variant is a bit mild.
The AUD/USD is in a tight range also as investors assess the latest US jobs numbers. On Friday, official numbers from the American government showed that the economy added just 199k jobs in December last year. That figure was significantly lower than the median estimate of 422k.
While the headline figure was weak, economists welcomed the positive sides of the data. For example, the unemployment rate, which the Fed pays a close attention to, declined to a pandemic-era low of 3.9%.
The figure has consistently declined after it peaked at 14.5% in 2020. Wages also rose by 0.6% in December. Therefore, analysts believe that the RBA and the Federal Reserve will maintain a hawkish tone this year.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD strong rally found a strong resistance at the 0.7275 level. This price was also along the 50% Fibonacci retracement level. It is now slightly below the 25-day and 50-day moving averages while the Stochastic oscillator has moved slightly above the oversold level of 19.
Therefore, the pair will likely resume the downward trend as bears target the key support level at 0.7100. This view will be invalidated if the price manages to move above the key resistance at 0.7275.
