Bearish view
- Sell the AUD/USD par and set a take-profit at 0.6835.
- Add a stop-loss at 0.7150.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7150.
- Add a stop-loss at 0.6835.
The AUD/USD exchange rate pulled back for two consecutive days, moving from a high of 0.7145 this year to the current 0.7035. The pair will likely be volatile this week as the Federal Reserve and the Reserve Bank of Australia (RBA) release minutes of their last minutes.
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Fed and Reserve Bank of Australia Minutes Ahead
The AUD/USD pair has retreated in the past few days as market participants reacted to the latest macro data from the United States. Data compiled by the Bureau of Labor Statistics (BLS) showed that the economy created over 130k jobs in January and the unemployment rate dropped to 4.3%.
More data revealed that inflation dropped to 2.4% in January, while the core CPI remained unchanged at 2.5%. These numbers mean that the Fed will likely cut interest rates several times this year.
The next key catalyst for the AUD/USD pair will be the upcoming minutes of the last meeting of the Reserve Bank of Australia. The bank decided to hike interest rates by 0.25% to 3.85% in the last meeting, citing the recent inflation report. Recent data showed that the headline Consumer Price Index continued rising in December, moving further away from the bank's target of 2.0%.
The Federal Reserve will publish minutes of the last monetary policy meeting, in which officials decided to leave interest rates unchanged between 3.50% and 3.75%.
These minutes will provide more information on what the two banks did in the last meetings, and provide signals on what to expect in the next meetings. Economists expect the RBA to hike interest rates by 0.25% in the next meeting, while the Federal Reserve is expected to deliver one to three cuts this year.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate peaked at 0.7145 last week and then retreated to the current 0.7073. It has moved below the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
The Relative Strength Index (RSI) has moved below the overbought level of 70,while the two lines of the Percentage Price Oscillator are about to cross each other.
It remains slightly above the 50-day Exponential Moving Average (EMA). Therefore, the pair will likely retreat further and move to the Major S&R pivot point at 0.6835.
A move above the key resistance level at 0.7145 will invalidate the bearish outlook and point to more gains.