Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7200.
- Add a stop-loss at 0.7150.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7058 and a take-profit at 0.7000.
- Add a stop-loss at 0.7150.
The AUD/USD pair tilted upwards as the US dollar retreated following the latest minutes by the Federal Reserve. The pair rose to 0.7091 on Thursday morning, which was slightly higher than this week’s low of 0.7037.
US GDP Data Ahead
The Fed published its minutes for this month’s meeting. The minutes provided more color about the deliberations that took place earlier this month. In that meeting, officials decided to hike interest rates by 0.50%, the highest increase in two decades.
The minutes showed that officials are willing to go further than that. They showed that most members of the committee are now comfortable with more 0.50% rate hikes in the next couple of meetings. That’s a higher forecast than what most analysts were expecting. It is also more hawkish than what the Reserve Bank of Australia (RBA) expects to do.
The risk for the Fed is that these aggressive rate hikes will push the US into a recession as consumer spending slows dramatically. Recent numbers have shown that this has started happening.
For example, data published on Tuesday revealed that new home sales declined by more than 16% as mortgage rates surged. Retail sales have started dropping as inflation rises. At the same time, consumer confidence has been in a strong downward trend.
There will be no major data from Australia today. Therefore, investors will focus on the upcoming numbers from the US. The statistics agency will release the latest GDP estimates. Economists expect the data to reveal that the American economy expanded by 8.0% on a year-on-year basis as it contracted by 1.3% on a QoQ basis. Still, the impact of these numbers on the pair will be limited since they are the second estimate. The US will also publish pending home sales numbers.
AUD/USD Forecast
On the four-hour chart, we see that the AUD/USD pair has been in a strong bullish trend in the past few days. The pair formed an ascending channel that is shown in black. It is now above the lower side of the channel and is above the 25-day and 50-day moving averages while the MACD has formed a bearish divergence pattern. The pair is also slightly below the 38.2% Fibonacci retracement level.
Therefore, the pair will likely keep rising as bulls target the upper side of the rising channel at 0.7172. The stop-loss for this trade will be at 0.7030.
