Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6930.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6870 and a take-profit at 0.6950.
- Add a stop-loss at 0.6785.
The AUD/USD price drifted downwards after some positive signs about the Australian economy. It also rose after the latest Federal Open Market Committee (FOMC) minutes. Investors are now focused on the upcoming US jobs data and the first interest rate decision by the Reserve Bank of Australia scheduled for Tuesday next week.
Australia and China relations
The Australian dollar inched lower after some positive rumors about China and Australian relations. There are rumors that Beijing will start importing Chinese coal a sign that relations between the two countries are thawing. According to Bloomberg, the government is considering allowing four companies to restart shipments.
Another positive catalyst was news that Australia had boosted its wheat harvest. GrainCorp, the biggest player in the industry, said that it was seeing strong demand from China and other countries as they diversify its sources. Analysts expect that the crop will earn farmers $12 billion this year from $9 billion in 2022.
The AUD/USD price also reacted to the latest minutes of the Federal Reserve. In its December meeting, the bank decided to hike interest rates by 0.50% after hiking by 0.75% in the previous four straight meetings. Some Fed officials supported a more aggressive tone until more evidence that inflation was cooling emerged. Others supported a more cautious view.
The next data to watch will be the upcoming American jobs data scheduled for Friday. These numbers will likely show that the labor market remained robust in December. Economists expect that the economy added over 200k jobs again in December while the unemployment rate dropped slightly to 3.8%.
The Reserve Bank of Australia will start its two-day meeting on Monday next week. Analysts believe that the bank will hike again by 0.25% and provide hints that the hiking cycle was now ending. Australia’s inflation has cooled recently while the labor market is still tight.
AUD/USD forecast
The AUD/USD price declined after the relatively hawkish Fed minutes. It dropped to a low of 0.6827, which was lower than this week’s high of 0.6877. It has moved above the 25-day and 50-day exponential moving averages (EMA) and the ascending trendline shown in black. The Average Directional Index has retreated while the Stochastic Oscillator moved below the overbought level.
The pair will likely remain at the 0.6800 support level ahead of the upcoming US non-farm payrolls (NFP) data on Friday. A more bullish view will be confirmed if it manages to move above the important resistance point at 0.6900.
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