Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6950.
- Add a stop-loss at 0.7050.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7025 and a take-profit at 0.7100.
- Add a stop-loss at 0.6975.
The AUD/USD price retreated on Monday morning as investors waited for a relatively busy week ahead. The pair is trading at 0.700, which is about 4.35% below last week’s high of 0.7320.
RBA Decision and Key Data Ahead
The AUD/USD retreated on Monday as investors reflected on the latest economic data from China. According to the country’s statistics agency, the manufacturing PMI declined at a lower pace than what analysts were expecting. Precisely, the PMI declined from 50.3 in December last year to 50.1 in January.
On the other hand, data by Caixin revealed that the manufacturing PMI declined below 50 in January. It came in at 49.1, which was slightly below the December high of 50.9.
Chinese numbers are important for the Australian economy because of the vast amount of goods that Australia sells to China.
The next key catalyst for the AUD/USD pair will be the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The bank is expected to first interest rate decision of the year on Tuesday morning.
Analysts expect that this will be the most important decision the bank has done in the past few months. That’s because the bank will provide more details about what it intends to do this year.
There are three key scenarios. First, the bank could decide to end its asset purchases in this meeting. Second, it could start slowing down the asset purchases and then hint about ending them at a later date, possibly in May.
Finally, the bank could leave the asset purchases steady and then hint about ending it in the May meeting. The bank’s statement about these policies will have an impact on the AUD/USD pair.
The pair will also move because of the bank’s statement on interest rates. In the previous meetings, the bank has hinted that it will hike in 2023 or 2024. Analysts believe that it could provide a hint that it will hike this year.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bearish trend in the past few days. The sell-off accelerated when the pair moved below the key support level at 0.7083, which was the lowest level on December 20th last year.
It has also moved below the 25-day and 50-day exponential moving averages while the stochastic oscillator has moved below the oversold level. Therefore, the pair will likely keep falling as bears target the next support at 0.6950.
