Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6555.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6480 and a take-profit at 0.6400.
- Add a stop-loss at 0.6550.
The AUD/USD pair retreated slightly as traders refocused on the upcoming US GDP and PCE economic numbers. The pair dropped from this week’s high of 0.6530 to a low of 0.6490.
US GDP and PCE data
The Australian dollar rallied and then pulled back after Australia published strong consumer inflation data. According to the statistics agency, the headline Consumer Price Index (CPI) retreated from 4.1% in Q4’23 to 3.6%, which was higher than the median estimate of 3.4%.
The CPI rose from 0.6% to 1.0% on a QoQ basis. This figure was also higher than the expected 0.8%. The trimmed mean CPI rose by 4.0% while the weighted mean CPI rose to 4.4%.
These numbers mean that the country’s inflation remained higher than what the Reserve Bank of Australia (RBA) was expecting. They also mean that the country’s prices are not falling faster than expected.
Therefore, the RBA will likely maintain a hawkish sentiment in its upcoming meeting in May. Some analysts see the bank signaling that hikes will be possible if inflation remains this high.
Worse, there is an expectation that Australia, like the United States, will go through a period of reflation as energy prices rise.
Looking ahead, the remainder of the week will be important for the AUD/USD pair as the US will publish two important economic numbers. On Thursday, it will release the first estimate of the US GDP numbers.
Economists expect the data to show that the economy expanded by 2.5% in the first quarter after growing by 3.4% in Q1. That will mean that the economy has expanded by 2% for seven straight quarters.
The US will then release the PCE report, which is the Fed’s favorite inflation number. Economists expect the data to reveal that the headline PCE rose from 2.5% in February to 2.6% in March. The core PCE is expected to come in at 2.6%, higher than the Fed’s target of 2.0%.
AUD/USD technical analysis
The AUD/USD pair peaked at 0.6530 after the strong Australian inflation report and then pulled back to 0.6482. That was a crucial price since it was along the 23.6% Fibonacci Retracement level. It was also at the lowest swing on April 1st, meaning that it has formed a break and retest pattern.
The pair has moved above the 50-period Arnaud Legoux Moving Average (ALMA) while the Relative Strength Index (RSI) has moved from the overbought level of 75 to 62. Also, it has formed a small inverse head and shoulders pattern.
Therefore, the outlook for the pair is extremely bullish, with the next point to watch being the 38.2% retracement point at 0.6555.
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