Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6600.
- Timeline: 1-3 days.
Bullish view
- Set a buy-stop at 0.6550 and a take-profit at 0.6625.
- Add a stop-loss at. 0.6450.
The AUD/USD pair remained in a tight range on Thursday now that the Federal Reserve and the Reserve Bank of Australia (RBA) have delivered their first interest rate decisions of the year. It is still hovering near its lowest level since November last year as traders wait for the next potential catalyst.
No major economic data ahead
The last two weeks have been quite important for the AUD/USD pair. Last week, the Federal Reserve delivered its policy decision that was in line with expectations. It left interest rates unchanged and hinted that it would not cut rate in March.
The other important event was the US nonfarm payrolls (NFP) data that came out on Friday. These numbers revealed that the American economy added over 350k jobs while the unemployment rate remained at 3.7%. These numbers meant that the economy is doing much better than expected.
This week, the Reserve Bank of Australia (RBA) delivered its first of eight meetings scheduled for this year. The bank expects to maintain rates higher for a while until it sees signs that inflation is falling.
Now, the pair has entered a wait-and-see phase as investors focus on the upcoming economic data. The most important one will come out next week when the US will release the latest consumer and producer inflation numbers, which are part of the Fed's dual mandate.
A higher-than-expected inflation figure will signal that the Fed is correct in maintaining a moderately hawkish tone. It will also mean that the bank will not cut in the first half of the year.
In the immediate short-term, there will be no economic data from the US and Australia on Thursday. Instead, the key data to watch will be the upcoming initial and continuing jobless claims numbers. There will also be a statement by Tom Barkin, a Fed official. His statement will not have an impact on the pair since he shared his thoughts about interest rates in a speech on Wednesday.
AUD/USD technical analysis
The AUD/USD exchange rate has been in a downward trend after peaking at 0.6870 in December. During this retreat, the pair has formed a head and shoulders pattern, a popular sign of a reversal. The pair has remained below the 50% Fibonacci Retracement level and the 50-period moving average.
Therefore, the Australian dollar will likely have a bearish breakdown in the coming days. A drop below this week's low of 0.6468 will point to more downside, with the next target being at 0.6400.
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