Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6605.
- Add a stop-loss at 0.6525.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6540 and a take-profit at 0.6485.
- Add a stop-loss at 0.6640.
The AUD/USD pair continued its bullish comeback as it rose for five straight days as traders reflected on the latest RBA minutes. The pair bounced back to a high of 0.6580, which was much higher than this month’s low of 0.6442.
Fed minutes ahead
The AUD/USD continued rebounding on Tuesday after the Reserve Bank of Australia published minutes of its first meeting on Tuesday. These minutes provided more information about the deliberations that happened during the meeting.
The minutes showed that the bank considered raising interest rates by 0.25% in a bid to fight the stubbornly high inflation. Most officials, however, concluded that a hike would do little to lower inflation, which it expects will move back to its target in the next two years.
Also, the committee noted that a rate hike would affect the country’s recovery, which is being hampered by China’s slow growth and weak commodity prices. Some analysts expect the central bank will start slashing rates later this year.
The next important AUD/USD news will come from the United States, where the Fed will publish minutes of the last meeting. Like in Australia, these minutes will provide more details about the last meeting. In that meeting, the bank decided to leave rates unchanged and pushed back against hopes of a rate cut in March.
Recent economic numbers have made the likelihood of a rate cut more difficult. Inflation has remained above 3% while the labor market is strong. The unemployment rate remained at 3.7% while wage growth has continued rising. In this case, analysts expect the Fed to start cutting rates in June.
The other important event will be a speech by Federal Reserve’s Michele Bowman. In her previous statements, she has made the case of taking a cautious tone before cutting rates.
AUD/USD technical analysis
The AUD/USD pair has continued rising in the past few days. On Tuesday, the pair managed to flip the important resistance point at 0.6543 into a support level. This was a crucial point since it was the neckline of the inverse head and shoulders (H&S) pattern.
The pair has also moved above the 23.6% Fibonacci Retracement point, signaling that bulls are gaining control. It has also moved slightly above the 50-period moving average. Therefore, the outlook for the pair is bullish, with the next reference level to watch being the 38.2% retracement point at 0.6605.
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