Bearish view
- Set a sell-stop at 0.6740 and a take-profit at 0.6650.
- Add a stop-loss at 0.6850.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6800 and a take-profit at 0.6900.
- Add a stop-loss at 0.6700.
The AUD/USD exchange rate rose slightly in the overnight session even as more reports of a more hawkish Federal Reserve. The pair rose to a high of 0.6771, which was slightly above this week’s low of 0.6700.
Fed set to hike by 0.75%
The AUD/USD pair has been in the spotlight this week as investors focused on key Australian data and Reserve Bank of Australia (RBA) interest rate decision. On Tuesday, the RBA decided to hike interest rates by 0.50% and hinted that more rates hikes are on the way. Analysts expect that the bank will hike rates by 0.50% in October followed by a 0.25% increase in the following month.
On Wednesday, the pair reacted to a series of economic data from Australia. According to Australia’s Industry Group (AIG), the services PMI rose from 51.7 in July to 53.3 in August. This is a sign that the important sector is doing well.
Meanwhile, according to the Australian Bureau of Statistics (ABS), the Australian economy expanded from 0.7% in Q1 to 0.9% in Q2. This increase translated to a year-on-year increase of 3.6%, which was also better than the median estimate of 3.5%. Consumer spending rose by 1.3% while capital expenditure increased by 0.2%.
Still, analysts believe that this growth will start slowing as the impact of the soaring rate hike sets in. For example, the closely watched savings ratio dropped to the lowest level since 2019 signaling that consumers were increasing their spending as inflation rose.
Meanwhile, the Fed seems to be on a path to raising rates by another 0.75%. According to the WSJ, Fed officials have done little to push back against market expectations of another giant hike. Therefore, the AUD/USD pair will react to an upcoming speech by Jerome Powell.
AUD/USD forecast
The AUD/USD pair dropped to a low of 0.6700 on Wednesday. It then bounced back in the overnight session as the US dollar strength cooled. It rose to the key resistance level at 0.6766, which was the lowest level on July 1. This means it has done a break and retest pattern.
It has also moved below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) is pointing upwards. It has risen above the first support of the standard pivot point. Therefore, because of the head and shoulders pattern, the pair will likely resume its bearish trend as sellers target the key support at 0.6650.
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