Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6300.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6325 and a take-profit at 0.6200.
- Add a stop-loss at 0.6425.
The AUD/USD price remained in a consolidation phase after the latest interest rate decision by the Reserve Bank of Australia (RBA). It was trading at 63 cents on Tuesday morning, which was still higher than last month’s low of 0.6170.
RBA rate decision
The Australian economy is slowing as consumers remain wary about the elevated inflation. On Monday, data by the Australian Bureau of Statistics (ABS) showed that retail sales rose for the 9th straight month. This increase, however, was driven more by higher prices instead of volume. Turnover rose by 0.6% on a month-on-month basis.
It is against this backdrop that the Australian Central Bank delivered its monetary policy decision on Tuesday. In it, the bank decided to hike interest rates by 0.25% for the second straight month. It brought rates from a record low of 0.1% in May to 2.85%.
In its statement, the bank said that higher interest rates were needed to fight the soaring inflation. Data published last week showed that the country’s inflation surged by 1.8% in the third-quarter, leading to a year-on-year increase to 7.35. The weighted and trimmed mean CPIs also continued rising.
The bank expects that inflation will remain above its target of 2.0% for longer than expected. As such, analysts believe that the bank will keep hiking rates in the coming months.
The RBA decision came a day ahead of the latest decision by the Federal Reserve. Economists expect that the divergence between the Fed and the RBA will continue widening in the coming months. The Fed is expected to hike interest rates by 0.75% in this meeting.
The key data to watch will be the latest JOLTs job openings data from the US. It will also react to the latest ISM manufacturing PMI data from the US.
AUD/USD forecast
The AUD/USD pair declined and retested the important support level at 0.6364, which was the lowest level on September 28. It remains between the ascending channel that is shown in blue. The Relative Strength Index (RSI) has moved below the neutral level while the price is at the 50-day moving averages.
The pair will likely keep rising as bulls target the key resistance level at 0.6500. A drop below the key support level at 0.6330 will invalidate the bullish view.
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