Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6850.
- Add a stop-loss at 0.7025.
- Timeline: 1 day.
Bullish View
- Set a buy-stop at 0.7000 and a take-profit at 0.7100.
- Add a stop-loss at 0.6900.
The AUD/USD price is hovering near its highest level since June 28th even after the International Monetary Fund (IMG) global economic downgrade. The pair is trading at 0.6930, which is about 4% above the lowest point this month.
Australia Inflation Soaring
Consumer prices in Australia are surging as the cost of energy remains at an elevated level. According to the Australian Statistics Bureau, the headline consumer inflation rose rom 5.1% in the first-quarter to 6.1% in Q2. This was the biggest jump in inflation in decades and is significantly higher than the -0.3% it hit during the pandemic.
The bureau blamed the soaring inflation to energy as the cost of oil and gas continued rising. Still, Australia has managed its inflation better than its peer countries like the US, UK, and the EU, where inflation has risen to over 8%.
The Australian inflation data came three weeks after the Reserve Bank of Australia (RBA) decided to hike interest rates for the third straight month. In a statement, the bank hiked rates by 50 basis points and hinted that it will continue tightening in the coming months.
The next key catalyst for the AUD/USD pair will be the upcoming interest rate decision by the Federal Reserve. Analysts expect that the bank will continue hiking interest rates in a bid to fight the soaring inflation. Data published this month revealed that consumer prices in the US rose by 9.4% in July.
Recently, however, there are signs that US inflation may have peaked. For example, the average gasoline price in the US has dropped from $5 to about $4.33. Similarly, commodities like copper, iron ore, and aluminium have declined in the past few months.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a bullish trend in the past few days. It rose to a high of 0.6981 last week. This was a notable level since it was along the 50% Fibonacci Retracement level. The pair has also moved slightly above the 25-day and 50-day moving averages while the RSI is pointing downwards. It is also above the Ichimoku cloud.
Therefore, the pair will likely keep resume the downward trend ahead of the upcoming FOMC decision. If this happens, sellers will likely retest the support at 0.6850. A move above the resistance point at 0.700 will invalidate the bearish view.
Ready to trade our daily Forex signals? Here’s a list of some of the best Forex trading platforms to check out.