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AUD/USD Forex Signal: Room for More Upside Remains

Bullish view

  • Buy the AUD/USD pair and set a take-profit at 0.6800.
  • Add a stop-loss at 0.6650.
  • Timeline: 1-2 days.

Bearish view

  • Set a sell-stop at 0.6735 and a take-profit at 0.6650.
  • Add a stop-loss at 0.6800.

AUD/USD Signal Today - 10/07: Upside Potential (Chart)

The AUD/USD exchange rate held steady after the Fed’s Jerome Powell signaled that the central bank was preparing for interest rate cuts if inflation continues retreating. The pair soared to a high of 0.6758, its highest level since January 2nd.

Fed and RBA's next actions

The AUD/USD pair rose after Jerome Powell’s first day of testimony in Congress. In his statement, he said that the bank welcomed the recent encouraging inflation numbers, which showed that prices were moderating.

This statement came after data by the US government showed that the headline consumer inflation eased to 3.3% while the personal consumption expenditure (PCE) figure dropped to 2.6%. These numbers remained relatively higher than the Fed’s target of 2.0%.

Therefore, the market interpreted the statement to mean that the Fed would start cutting interest rates in September if inflation continued to fall.

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    Powell will continue his testimony on Wednesday although its impact on the AUD/USD pair will likely be muted. Instead, traders will be waiting for Thursday’s Consumer Price Index (CPI) data.

    Economists polled by Reuters expect the data to show that the headline CPI softened to 3.2% while the core CPI retreated to 3.4%. If these numbers are correct, it will signal that inflation is slowing at a slower pace and that it will take longer to reach its 2% target.

    Therefore, the AUD/USD pair has risen because the Reserve Bank of Australia (RBA) has become the only major hawkish central banks. In its recent meeting, the central bank warned that it might be forced to hike interest rates if inflation remains elevated.

    Most analysts don’t expect the RBA to cut in its meeting on August 6th. However, it could point to higher interest rates for longer.

    AUD/USD forecast

    The daily chart has been in a strong bullish trend in the past few weeks. It recently crossed the important resistance point at 0.6662 (March 8 high) and 0.6712 (May 16th and 13th June high).

    The pair has also formed an inverse head and shoulders pattern. It has also moved above the Ichimoku cloud and tested the first support of the Woodie pivot point.

    Therefore, the pair will likely continue rising as buyers target the key resistance point at 0.6800. The stop-loss of this trade will be at 0.6670.

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    Crispus Nyaga
    About Crispus Nyaga
    Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
     

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