Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6787.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6750 and a take-profit at 0.6800.
- Add a stop-loss at 0.6700.
The AUD/USD exchange rate retreated on Monday morning as the focus shifted to the upcoming interest rate decision by the Reserve Bank of Australia (RBA). It dropped to a low of 0.6722, the lowest point since July 12th.
Fed decision ahead
The AUD/USD price retreated last week even after the relatively robust jobs numbers from Australia. According to Australia’s Bureau’s of Statistics (ABS), the economy added over 32k jobs in June as the labor market strength continued. Economists were expecting the economy to add 15k jobs.
The unemployment rate dropped to 3.5% from the previous month. Therefore, with inflation still above the RBA target of 2.0%, the decision put pressure on the Reserve Bank of Australia (RBA). In its meeting in July, the bank decided to leave interest rates unchanged at an eleven-year high of 4.1%.
The biggest AUD/USD news of this week will be the Federal Reserve interest rate decision scheduled for Wednesday. It will also react to the ongoing earnings season, with 150 companies in the S&P 500 scheduled to publish their results. The most notable ones will be Microsoft, Alphabet, and Meta Platforms.
Economists polled by the Federal Reserve expect that the bank will decide to hike rates by 0.25%. If this happens, the bank will bring rates to between 5.25% and 5.5%, the highest increase since 2001.
Analysts believe that the Fed will then leave rates unchanged for the rest of the year since inflation is falling and the economy slowing. Data published this month revealed that American consumer inflation dropped to 3.0% in June from the previous 4.1%.
Some of the most recent numbers have shown that the economy is slowing. For example, building permits, housing starts, and existing home sales dropped in June. Retail sales also slipped in June.
AUD/USD technical analysis
The AUD/USD exchange rate continued slipping last week even after the strong Australian jobs data. It dropped from this month’s high of 0.6894 to 0.6730. As it slipped, the pair crossed the key support level at 0.6787, the lowest point on June 17. It has moved below the 25-period and 50-period moving averages while the Relative Strength Index is nearing the oversold level.
Therefore, the next level to watch will be at 0.6706, the highest point on July 4th. This price should provide some support. A break below that level will see it drop to 0.6650.
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