Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6250.
- Add a stop-loss at 0.6425.
- Timeline: 1 day.
Bullish view
- Set a buy-stop at 0.6400 and a take-profit at 0.6500.
- Add a stop-loss at 0.6300.
The AUD/USD exchange rate continued falling as traders reacted to the strong US dollar and the first interest rate decision by Michele Bullock. The pair slipped to a low of 0.6363, much lower than last Friday’s high of 0.6497.
RBA interest rate decision
The US dollar index continued rising on Monday as investors embraced a risk-off sentiment in the market. American equities plunged, with the Dow Jones index falling by more than 200 points and the S&P 500 retreating by 50 points.
Other assets also declined, with bond yields soaring to the highest level in more than a decade. The 10-year yield jumped to 4.70%, the highest point since 2007 while the 30-year shot up to 4.8%. Commodities like crude oil, silver, copper, and gold plunged by more than 1%.
The only major asset that jumped sharply was the US dollar index (DXY), which jumped by more than 0.70% to a multi-month high of $106.62. A stronger dollar and rising bond yields are signs that investors are getting worried about the economy.
The AUD/USD pair also retreated after the first monetary policy meeting by Michele Bullock, the new RBA governor. In it, she decided to leave interest rates unchanged at 4.1% as most analysts were expecting.
The meeting came at a time when the recent economic numbers are sending mixed signals about the economy. Data published on Thursday showed that the labor market was still tight as the economy added 64.9k jobs in August. However, the unemployment and underemployment rate jumped during the month.
Inflation also remains above the bank’s target of 2.0%. Therefore, Bullock said that the bank would consider taking more measures to ensure that inflation retreats. She expects the headline inflation will move to 2% by 2025.
AUD/USD technical analysis
The AUD/USD pair has been in a strong sell-off in the past few months. This sell-off continued after the latest interest rate decision by the RBA. It moved below the 23.6% Fibonacci Retracement level and the 25-period and 50-period moving averages. The pair also moved to the lower side of the Bollinger Bands.
The pair also slipped below 0.6363, the lowest level on September 7th. Therefore, the pair will likely continue falling as sellers target the next psychological level at 0.6250.
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