Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6750.
The AUD/USD pair dropped slightly as the recent bull run lost momentum amid a relatively strong US dollar. It retreated to 0.6686, a few pips below this month’s high of 0.6765.
US to Publish Closely-Watched Inflation Report
The AUD/USD exchange rate retreated on Monday as traders continued to reflect on the US non-farm payrolls data. This report was mixed, with the economy adding 55,000 jobs and the unemployment rate moving downwards to 4.0%.
What was clear, however, is that the labor market is still soft as companies offset the cost of tariffs by laying off workers. Some popular firms, including popular names like Amazon, Google, and Dell, announced huge layoffs last year.
The manufacturing sector has been the most affected as the cost of raw materials soared. As a result, the sector has shed thousands of jobs in the past few months. Layoffs in the government sector have also contributed to the softening of the labor market.
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The AUD/USD pair will react to the upcoming US Consumer Price Index (CPI) report. These numbers are expected to show that US inflation remained above the 2% target. A lower rate than expected would raise the possibility that the Federal Reserve will cut interest rates more than expected.
Minutes released recently showed that most officials supported more cuts later this year if inflation continued falling.
A recent report from Australia showed that the country’s inflation remained above the 2% target. The headline CPI came in at 3.4% from the previous 3.8%. In a statement on Friday, Andrew Hauser, the Deputy RBA governor, said that inflation was still too high. Therefore, the bank will likely leave interest rates unchanged or hike rates later this year.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate has rebounded in the past few months. It has rebounded from a low of 0.6420 in November to a high of 0.6765.
The pair then pulled back and moved to a low of 0.666 as the rally lost momentum. It has moved below the key support at 0.6700, the upper side of the cup-and-handle pattern.
The pair has remained above the 50-day moving average. Also, the MACD indicator has remained above the zero line, while the Relative Strength Index (RSI) has pointed downwards. It has also formed an ascending channel.
Therefore, the pair will likely bounce back as bulls target the upper side of the channel at 0.6764. A drop below the ascending channel will point to more downside.
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