Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6620.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6595 and a take-profit at 0.6670.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate is hovering near its highest point since March 21st as the strong US jobs numbers fueled rate cut delay fears. The pair was trading at 0.6580 on Monday morning, 1.52% above its lowest level this month.
US Fed rate cut delay fears
The US dollar eased slightly after the US published strong jobs numbers on Friday. According to the Bureau of Labor Statistics (BLS), the economy created over 303k jobs in March, higher than last month’s 270k. The figure was higher than the median estimate of 212k.
Additional data revealed that the unemployment rate retreated from 3.9% to 3.8% while the participation rate rose from 62.5% to 62.7%. The two figures were higher than the median estimate of 3.9% and 62.6%. Wages also continued growing at a faster pace than expected.
These numbers mean that the American economy was doing well. At the same time, the country’s inflation has remained at an elevated level. As a result, there are signs that the Fed will not cut interest rates as expected earlier.
Looking ahead, this will be an important week for the AUD/USD pair because of key events. The US will publish the latest US inflation numbers on Wednesday. Economists polled by Reuters show that the country’s inflation rose slightly in March.
The headline CPI is expected to come in at 3.4% while core inflation rose to 3.8%. These numbers are much higher than the Federal Reserve target of 2.0%.
The other important catalyst for the AUD/USD pair will be the upcoming Federal Reserve minutes scheduled for Wednesday. These minutes will provide more information about the last meeting and what officials deliberated.
Last week, most Fed officials hinted that they will be data-dependent when deciding when to cut rates. In one of the statements, Raphael Bostic, the head of the Atlanta Fed, hinted that the bank should start cutting rates in the fourth quarter.
AUD/USD technical analysis
The AUD/USD pair bottomed at 0.6482 last Monday and then bounced back to a high of 0.6620 on Thursday. It has pulled back below the crucial support at 0.6595, its highest swing on February 22nd this year.
The pair has remained slightly above the 25-period and 50-period Weighted Moving Averages (WMA). At the same time, the Percentage Price Oscillator (PPO) while the Stochastic Oscillator has drifted downwards.
The pair will likely resume the downtrend amid the rising divergence of the Federal Reserve and the Reserve Bank of Australia (RBA). This price action will likely see it drop to the key psychological level of 0.6500.
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