Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6300.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6360 and a take-profit at 0.6300.
- Add a stop-loss at 0.6450.
The AUD/USD exchange rate rebounded sharply as the US dollar index (DXY) retreated. After falling to a multi-month low of 0.6287 on October 3rd, the pair rebounded to the psychological level at 0.6400.
FOMC minutes and US CPI data
The AUD/USD pair had an eventful week as the Reserve Bank of Australia (RBA) delivered its rate decision and the US published its jobs data. In the first meeting by Michele Bullock, the RBA decided to leave interest rates unchanged.
Meanwhile, ADP data revealed that non-farm private payrolls rose by just 89k in September. A separate report by the Bureau of Labor Statistics (BLS) showed that the economy added over 336k jobs in September while the unemployment rate rose to 3.8%.
The strong jobs numbers led to higher bond yields and stock prices. The 30-year yield rose to 4.96%, a few basis points below last week’s high of 5%. At the same time, the 10-year yield rose to 4.80%.
Looking ahead, the AUD/USD pair will continue reacting to the ongoing crisis in the Middle East. Israel has now declared war after it was attacked by Hamas. The risks is that this escalation will lead to higher crude oil prices, inflation, and more tightening.
The pair will also react to the upcoming Federal Reserve minutes and the US Consumer Price Index (CPI) data scheduled for Thursday. These minutes will provide more information about the last meeting.
In that meeting, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. It also pointed to more rate hikes in the coming meetings.
The latest US inflation data will provide more signs about the next Fed meeting. Economists polled by Reuters expect the data to show that the headline inflation rose to 3.6% in September.
AUD/USD technical analysis
The Australian dollar has done well in the past few days. As it rose, the pair flipped the important resistance point at 0.6358, the lowest swing on August 17th, September 5th, and September 27th. It has also risen above the 50-period moving average while the Relative Strength Index (RSI) has moved above the neutral point at 50.
Therefore, the pair will likely retreat as market risks rise. If this happens, the next key support level to watch will be at 0.6300. A move above the resistance at 0.6425 will invalidate the bearish view.
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