AUD/USD Forex Signal: Unconvincing Recovery

Bearish view

• Set a sell-stop at 0.6891 and a take-profit at 0.6800.
• Add a stop-loss at 0.6950.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 0.6935 and a take-profit at 0.700.
• Add a stop-loss at 0.6845.

The Australian dollar remained calm against most currencies after the Reserve Bank of Australia (RBA) published minutes of its first meeting of the year. The heavily-traded AUD/USD pair oscillated at about 0.6900, which was a few pips above the last week’s low of 0.6812.

RBA minutes points to more hiking

Minutes published by the RBA revealed that the bank was committed to continuing its hiking cycle in a bid to fight inflation. In that meeting, the committed voted to deliver another 0.25% rate hike, continuing a cycle that started in 2023.

The bank argues that more hikes are necessary because inflation remains stubbornly high while the labor market has been tightening. Data published recently showed that Australia’s inflation remained above 7.8% in the fourth quarter. In contrast, US inflation has drifted downwards to about 6.4%.

The minutes were in line with what Philip Lowe, the bank’s governor said last week. Therefore, analysts believe that the RBA has several 0.25% rate hikes to implement in the coming months.

The key catalyst for the AUD/USD pair will be the upcoming flash manufacturing and services PMI numbers from the US. Economists polled by Reuters expect that the PMI figures made some improvements in February even as they remained below the expansionary level of 50. Precisely, the two are expected to come in at 47.5 and 47.1, respectively.

The other data to watch will be the latest US existing home sales numbers. Expectations are that sales rose to 4.1 million in January as mortgage rates dropped.

Further, the main data to watch this week will be the upcoming FOMC minutes scheduled for Wednesday. These minutes will also provide more information about what to expect in the coming months.

AUD/USD forecast

The AUD to USD pair rose slightly above the key resistance level at 0.6870 on Friday last week. This price was the lowest point on February 6 and January 6. The pair also flipped the resistance at 0.6891 (Feb 13 low) into support. It also remains below the 25-day and 50-day moving averages, signaling that bulls are a bit hesitant. The Relative Strength Index (RSI) moved slightly above the neutral point at 50.

Therefore, the pair will likely retreat since the bullish momentum seems to be losing steam. This view will be confirmed if it moves below the supports at 0.6891 and 0.6870. If this happens, the pair will likely move below the psychological level at 0.6800.