Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6580.
- Add a stop-loss at 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6668 and a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
The AUD/USD pair was flat on Monday as last Friday’s rebound stalled. The Australian dollar retreated to a low of 0.6647, a few points below last Friday’s high of 0.6672. It has dropped from its highest point this month ahead of the upcoming Fed minutes.
Fed minutes ahead
The AUD/USD pair will react to the statements by Federal Reserve officials and the FOMC minutes scheduled for Wednesday. On Friday, Jerome Powell expressed concerns about what the Fed will do in the coming meetings.
He warned that the lack of liquidity in the banking sector could slow the American economy substantially in the coming months. This liquidity has waned after the collapse of Silicon Valley Bank, First Republic, and Signature Bank.
Therefore, he said that the Fed will likely not hike as fast as it had expected earlier this year. Meanwhile, in a separate statement on Sunday, Neel Kashkari of the Minneapolis Fed said that he will support pausing rate hikes in June. The pause will give the bank an opportunity to assess the impact of its previous interest rate hikes. He said:
“I would object to any kind of declaration that we’re done. If the committee chooses to skip a meeting because we want to get more information, I could make the argument why that makes sense.”
The main event in the economic calendar will be the upcoming minutes of the Federal Reserve scheduled for Wednesday. These minutes will provide more information about what the Fed did in this month’s meeting and what to expect ahead.
The other important AUD/USD news will be on the US debt ceiling issue. Joe Biden and Kevin McCarthy will meet on Monday to attempt to reach an agreement on raising the debt ceiling.
AUD/USD technical analysis
The 4H chart shows that the AUD/USD pair has been in a bearish trend in the past few days. This sell-off started when the pair peaked at 0.6816, the highest point on May 10th. It has moved below the 25-day and 50-day exponential moving averages (EMA). The MACD has pointed upwards while remaining below the neutral point.
The pair has also moved slightly above the key support at 0.6627, the lowest point on April 10 and March 24. Therefore, the AUD/USD pair will likely resume the bearish trend as sellers target the next key support at 0.6850.
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