Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6625.
- Add a stop-loss at 0.6725.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6680 and a take-profit at 0.6730.
- Add a stop-loss at 0.6620.
The AUD/USD price moved sideways on Monday as traders waited for the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The pair was trading at 0.6666, higher than last week’s low of ~0.6600.
RBA interest rate decision
The AUD/USD pair rose on Friday after the US published encouraging inflation data. According to the statistics agency, the personal consumer expenditure (PCE) dropped to 4.6% in May, better than the median estimate of 4.7%. This is an important number since it is the Fed’s favorite inflation figure.
The data came a day after the US published encouraging economic data. The economy expanded by 2.0% in Q1, better than the median estimate of 1.3%. Additional data from the US showed that the country’s housing sector is doing well.
Therefore, there is a likelihood that the Federal Reserve will restart its rate hikes later this month. Economists believe that the bank will hike rates by 0.25% and point to more increases later this year.
The most important AUD/USD news this week will be the RBA decision scheduled for Tuesday. Most analysts believe that the bank will deliver another 0.25% rate hike, pushing the official cash rate to 4.35%.
The most recent data showed that Australia’s inflation dropped to 5.6% in May. While this drop was encouraging, it remains higher than RBA’s target of 2.0%. At the same time, the strong wage growth means that inflation will remain stubbornly high.
The AUD/USD will likely have no major market action on Monday since most US traders will be away for the long weekend. US markets will open half day and be closed on Tuesday.
AUD/USD technical analysis
The AUD/USD pair has been in a strong bearish trend in the past few weeks, which saw it drop to a low of 0.6593 last week. It then bounced after the weak US PCE data on Friday. It remains below the 50-period moving average and the 50% Fibonacci Retracement level.
The pair is also sitting at an important resistance (June 23rd low). It is also above the upper side of the descending green channel and the lower side of the Andrews Pitchfork indicator.
Therefore, the pair will likely remain in this range on Monday as traders wait for the RBA decision. The key support and resistance levels for the pair will be at 0.6600 and 0.6725.
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