Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7280.
- Add a stop-loss at 0.7100.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7170 and a take-profit at 0.7100.
- Add a stop-loss at 0.7250.
The AUD/USD bullish momentum continued as investors continued cheering Australia’s reopening plans. The price rose to a high of 0.7195, which was the highest level since January 21st. It has risen by almost 2% from its lowest level on February 4th.
Australia Reopening
The main catalyst for the AUD/USD pair is the recent reopening decision by the Australian government. Earlier this week, Morrison’s administration said that it will allow double-vaccinated foreigners to visit the country.
That decision was welcomed by many Australians and the business community since the country has been locked to the outside community in almost two years.
Therefore, analysts expect that retail sales will jump as businesses serve tourists and residents. Most importantly, hotels and restaurants are expected to report strong growth considering that foreigners are the biggest spenders in hotels.
Data published this week showed that the services sector is doing well. As such, reopening will add fuel to the fire.
Meanwhile, the pair rose after the strong earnings by Commonwealth Bank (CBA). In a statement after earnings, the bank’s CEO said that the economy will continue doing well until at least 2023 barring any more lockdowns.
He also urged that the RBA should gradually hike rates in a bid to prevent the economy from overheating. Recent data suggests that some sectors like housing are getting substantially hot, with prices in key cities surging to record highs.
CBA expects that inflation will average between 3% and 3.5% this year. It also expects that the bank will hike interest rates to about 75 basis points later this year.
The AUD/USD pair will then react to the latest US consumer inflation data. Analysts expect that the data will show that inflation jumped to about 7.3% in January while core CPI rose to 5.3%.
AUD/USD Forecast
The four-hour chart shows that the pair has risen in the past eight consecutive four-hour sessions. It is trading at 0.7190, which is the highest it has been since January 21st. It has moved slightly above the 61.8% Fibonacci retracement level and the 25-day and 50-day moving averages. Further, the pair’s Relative Strength Index (RSI) has moved to the overbought level.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 0.7250. On the flip side, a move below the support at 0.7150 will invalidate this view.