Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6623.
- Add a stop-loss at 0.6470.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6525 and a take-profit at 0.6450.
- Add a stop-loss at 0.6625.
The AUD/USD pair rose to an important resistance point at 0.6542 on Monday as market participants reflected on recent economic numbers from the US and Australia. The pair has rebounded modestly from this month’s low of 0.6442.
FOMC minutes ahead
The AUD/USD pair had several important catalysts in the past two weeks. In this period, the Reserve Bank of Australia (RBA) and Fed delivered their interest rate decisions. They both left rates unchanged and hinted that they would remain higher for longer.
The other important events were the recent Australian and US inflation numbers. In the US, data published last week revealed that the headline inflation rose 3.1% in January. Core inflation, which excludes the volatile food and energy prices, rose to 3.8%. Key items like car insurance and housing have had the biggest impact on inflation.
Australia’s inflation grew at a slower pace in the fourth quarter. Despite this, there are signs that the RBA is committed to holding rates at a higher level for a while.
Meanwhile, there are concerns about the mining industry in the country as the prices of key metals like nickel collapse. The government is now planning offering tax credits to save the industry. Nickel prices have crashed hard because of increased production by Chinese companies in places like Indonesia.
Looking ahead, the only market-moving event this week will be Wednesday’s FOMC minutes, which will provide more information about the recent meeting. In it, the bank’s committee decided to leave interest rates unchanged between 5.25% and 5.50%.
The committee also pushed back slightly about when the first rate cut will happen. Jay Powell noted that the Fed will be less likely to start cutting in March as many analysts were expecting. The Fed is battling a situation of high inflation and strong economic growth.
AUD/USD technical analysis
The AUD/USD pair has rebounded slightly from its lowest point this month. It now sits slightly below the key resistance at 0.6542, where it has failed to move above recently. This price is along the neckline of the inverse head and shoulders pattern that has formed recently.
The pair has also moved slightly above the 50-period and 25-period moving averages while the Relative Strength Index (RSI) is pointing upwards. Therefore, the outlook for the pair is bullish, with the next point to watch being 0.6625, the highest swing on January 25th.
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