Bullish View
Buy the AUD/USD and add a take-profit at 0.7210.
Add a stop-loss at 0.7050.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 0.7100 and a take-profit at 0.700.
Add a stop-loss at 0.7200.
The AUD/USD continued its bullish rebound as investors reflected on the latest interest rate decision by the Reserve Bank of Australia (RBA). The pair is trading at 0.7137, which was above last week’s low of 0.700.
RBA Decision
The RBA concluded its monetary policy meeting on Monday and remained optimistic about the economy even as inflation rose. In its last meeting of the year, the bank decided to leave its interest rate unchanged at 0.1%. It also decided that it will keep buying A$4 billion bonds per week until February. The bank believes that these purchases are necessary to support the economy.
The bank did not provide a signal of when it will start its rate hike cycle. In the previous meetings, it hinted that the first interest rate hike will come in 2024. In this week’s meeting, the bank reiterated that it will be patient enough.
On inflation, the bank believes that prices will keep rising in the coming months. Recent data showed that inflation has already jumped above 3%. Still, the bank expects that prices will start to moderate in the coming months as the supply chain disruptions end. The bank also noted that the country’s inflation was substantially below 2%.
The AUD/USD rose even as a divergence has emerged between the Fed and the RBA. The Fed is expected to accelerate its tightening process next week. It will do that by substantially reducing the amount of money in its taper program.
The next key mover for the pair will be the latest JOLTS vacancies data from the United States. Analysts expect the data to show that the number of vacancies in the US jumped to more than 10 million in October. The next big movers will then be the latest US inflation data.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bullish trend in the past few days. The pair has jumped by more than 2% from its lowest level last week. Along the way, it has risen above the 23.6% Fibonacci retracement level. It has also moved slightly above the 50-day moving average. The 50-day and 25-day EMA have made a bullish crossover pattern.
Therefore, the pair will likely keep rising as bulls target the 38.2% retracement level at 0.7210.
