Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6600 and a take-profit at 0.6650.
- Add a stop-loss at 0.6500.
The AUD/USD price exchange rate moved sideways on Monday as the market continued reflecting on last Friday’s US Personal Consumption Expenditures (PCE) report. The pair was trading at 0.6575, where it has been in the past few days. This price is about 0.80% above the lowest point this month.
Federal Reserve decision ahead
The AUD/USD continued its consolidation after the latest US PCE data. Data revealed that the PCE figure dropped to 2.9% in December, its lowest point since March 2021. It peaked at 5.6% in February 2022, signaling that inflation is retreating.
This is an important report because it is the one that the Federal Reserve watches closely when making its decision. The figure also came lower than the official Consumer Price Index (CPI) report, which showed that inflation rose to 3.4% in December.
The PCE data came a day after the US published another strong GDP data. According to the statistics agency, the economy expanded by 3.3% in Q4 after growing by 4.9% in the previous quarter. It expanded by 6.3% in 2023 or $1.61 trillion to over $27 trillion as it avoided a dreaded recession.
There are signs that this growth will continue this year. A report by S&P Global revealed that the manufacturing PMI report moved above 50 for the first time in months. This is an important report that the economy was doing well.
Looking ahead, this will be an important week for the AUD/USD pair. The Federal Reserve will deliver its decision on Wednesday. Economists expect the data to show that the Fed will leave rates unchanged between 5.25% and 5.50%.
The pair will also react to Tuesday’s consumer confidence figure followed by the official jobs report on Friday.
AUD/USD technical analysis
The AUD/USD pair has remained in a tight range in the past few days. In this period, the pair has formed an ascending channel that resembles a bearish flag pattern. In most cases, this is a bearish sign. The pair has remained below the 50-period moving average while the Relative Strength Index (RSI) has moved below the neutral point.
Therefore, the pair will likely continue falling as global risks rise. If this happens, the next point to watch will be the psychological point at 0.6500. This view will be confirmed if the price moves below the support at 0.6525.
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