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 0.6595 and a take-profit at 0.6650.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate bounced back after the strong economic numbers from Australia and a mildly dovish statement by Jerome Powell. The pair rose sharply and reached a high of 0.6572, much higher than this week’s low of 0.6478.
Strong Australian data
The Australian economy performed better than expected in the fourth quarter. According to the statistics agency, the economy expanded by 1.5% in Q4, higher than the median estimate of 1.4%. This increase was, nonetheless, lower than the Q3 growth of 2.1%.
The economic growth was mostly because of the robust consumer spending even as inflation remained stubbornly high. Final consumption rose by 0.2% in Q4 while capital expenditure fell by 0.2%.
Another report showed that the country’s retail sales rose by 1.1% in January after contracting by 2.15 in the previous month. The AIG manufacturing index improved from -23.8 in January to -12.6 in February.
These numbers mean that the Reserve Bank of Australia (RBA) may have more room to hold rates steady before starting its cutting cycle.
The AUD/USD pair also reacted to the latest economic numbers from the US. ADP said the private sector created 140k jobs in February, missing the estimated 149k. It was higher than the 111k it created in January.
Further, a report by the Bureau of Labor Statistics (BLS) showed that the JOLTs job openings slipped from 8.88 million to 8.86 million in January. Still, the labor market is doing well even after the huge influx in immigrants.
The biggest news was a statement by Jerome Powell, the head of the Fed. In congressional testimony, he insisted that the bank was achieving its inflation goal. He expects that it will start cutting interest rates later this year. He will continue his testimony on Thursday.
AUD/USD technical analysis
The AUD/USD pair formed a small hammer pattern whose lower side was at 0.6478 on Tuesday. It then bounced back and is nearing its highest point this month. The pair has moved to the upper side of the symmetrical triangle pattern. It has also jumped above the 25-period and 50-period moving averages.
The two lines of the Percentage Price Oscillator (PPO) have moved above the neutral point. Therefore, the AUD/USD pair will likely retreat ahead of the upcoming US jobs report. This will happen as sellers target the lower side of the triangle pattern at 0.6500. On the flip side, a move above the resistance at 0.6595 (Feb high) will mean that there are more buyers willing to push it higher.
Ready to trade our free Forex signals? Here are the best forex platform Australia to choose from.