Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6480.
- Add a stop-loss at 0.6540.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6520 and a take-profit at 0.6600.
- Add a stop-loss at 0.6450.
The AUD/USD pair erased some of the losses made on Monday after a series of dovish statements by several Federal Reserve officials. It also rebounded after the Reserve Bank of Australia (RBA) published minutes of last month’s meeting. It rose to 0.6525, up from Monday’s low of 0.6480.
Dovish Fed statements
The AUD/USD exchange rate drifted upwards after dovish statements by Loretta Mester and Mary Daly. In separate statements, the two officials were optimistic that the Fed was on track to achieving its inflation target.
As a result, they expect that the Fed will start cutting rates in the second half of the year. Mester wants to see more data while Mary Daly estimated that the bank would deliver three cuts as it hinted in the last meeting.
Michele Bowman and James Williams spoke on Tuesday but did not provide any details about rate cuts. Jerome Powell, the Fed Chair, will speak today and provide more information about the state of the economy and what to expect.
The pair also rose after the Bureau of Labor Statistics (BLS) showed that the number of vacancies rose at a slower pace than expected. The country had over 8.76 million vacancies lower than the median estimate of 8.76 million.
Looking ahead, ADP will publish the March private payroll data on Wednesday. Economists expect the report to show that the private sector created 148k jobs in March, an improvement from the 140k it created in February.
The other notable numbers will be the ISM non-manufacturing PMI report. Estimates are that the services sector continued growing, with the figure expected to come in at 52.8. On Monday, a report by the ISM showed that the manufacturing sector expanded for the first time since 2022.
The AUD/USD pair will also react to statements by Fed officials like Jay Powell, Adriana Kugler, Michele Bowman, and Austan Goolsbee.
Meanwhile, in Australia, minutes by the RBA revealed that the officials have stopped thinking about additional rate hikes.
AUD/USD technical analysis
The AUD/USD pair bottomed at 0.6480 on Monday after the red-hot US manufacturing PMI report. It then rebounded after the relatively dovish statements by key Federal Reserve officials and reached a high of 0.6525.
On the 4H chart, the pair moved to the middle line of the Bollinger Bands. The three lines have widened, signalling that it has substantial volatility. Also, the Relative Strength Index (RSI) has pointed upwards and is nearing 50.
Therefore, the pair will likely retest the upper side of the descending channel and then resume the downward trend. It will then retest this week’s low at 0.6480.
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