Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6765.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6765.
- Add a stop-loss at 0.6650.
The AUD/USD exchange rate rose for three consecutive days as the US dollar softened amid concerns about the Federal Reserve's independence. It rose to a high of 0.6720, higher than last week's low of 0.6663.
Federal Reserve Independence at Risk
The Australian dollar rebounded as investors remained concerned about the independence of the Federal Reserve following a statement by Jerome Powell. In it, Powell said that the Department of Justice (DoJ) filed subpoenas regarding its headquarter’s upgrade.
Powell and most analysts believe that the lawsuit is because of Trump's desire to have much lower interest rates. While Powell’s term ends in May, he has the right to remain at the Fed through 2028. As such, by removing him, Trump would have a chance to nominate another friendly Fed official.
The AUD/USD pair also rose after the strong Australian household spending data, which showed that the economy was doing well. According to the statistics agency, spending jumped by 6.3% YoY and 1.0% MoM in November last year. Household spending is an important number because consumer spending is one of the biggest parts of the Australian economy.
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Looking ahead, the next key catalyst for the AUD/USD exchange rate will be the US consumer price index data, which will come out later today. Economists polled by Reuters expect the data to show that the headline Consumer Price Index (CPI) remained at 2.7%, while the core CPI retreated from 2.7% to 2.6% in December.
Inflation will likely continue moving downwards in the coming months as gasoline prices and mortgage rates have moved to the lowest level in years. Mortgage rates dropped after Trump asked officials in his administration to buy mortgage bonds worth $200 billion.
AUD/USD Technical Analysis
The 12-hour chart timeframe chart shows that the AUD/USD exchange rate has held steady in the past few days. It has crossed this important resistance level at 0.6700, the highest swing on September 17.
The pair has formed an ascending channel and a cup-and-handle pattern, a common bullish continuation sign. It also remains above the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the most likely forecast is where it continues rising as bulls target the next key resistance level at 0.6765, its highest point on January 7. The bullish outlook will be invalidated if it drops below the lower side of the ascending channel.
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