Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6817.
• Add a stop-loss at 0.6690.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 0.6690 and a take-profit at 0.6600.
• Add a stop-loss at  0.6800.

The Australian dollar rally gained steam as it jumped to the highest level since May 11th this year. The AUD/USD price soared as investors priced in the likely divergence between the Reserve Bank of Australia (RBA) and the Federal Reserve.

Fed and RBA divergence

The RBA caught many traders and economists off-guard when it decided to hike interest rates by 0.25% last week. In a statement, the bank cited the relatively high inflation and the strong wage growth. The most recent data showed that Australia’s inflation remained above 7% while wage growth stands at 3.7%.

However, there are signs that the labor market growth is easing as the country has added about 28k jobs this year to April. It added over 54k jobs in the same period in 2022. Labor productivity has also stalled in the past few months.

Therefore, the AUD/USD pair will react to the latest Australian jobs numbers scheduled for Thursday. Economists expect that the country’s unemployment rate remained unchanged at 3.7% in May as the economy added over 20k job during the month.

The biggest catalyst for the AUD/USD pair will be the US inflation data that will come out on Tuesday and the Federal Reserve interest rate decision. Economists believe that the data will show that the country’s consumer inflation dropped once again in May.

If they are accurate, these numbers will imply that the Federal Reserve's actions are working. The Fed has hiked rates to a multi-decade high of over 5%. It has hiked in the past ten straight meetings, the most hawkish it has been in years.

The Fed will conclude its meeting on Wednesday. With inflation moving in the right direction, analysts expect that the bank will leave rates unchanged.

AUD/USD forecast

The AUD/USD pair has been in a strong bullish trend in the past few days and is now hovering at its highest level since May. The pair has jumped above the important resistance point at 0.6574, the lowest level on April 28th. It is supported by the 25–period moving average and the RSI and MACD indicators

The pair will likely continue rising in the coming days as the divergence between the Fed and the RBA continues. If this happens, the pair will likely continue rising as buyers target the next resistance point at 0.6817, the highest point on May 10.

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