Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6850.
- Add a stop-loss at 0.7095.
- Timeline:1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7095.
- Add a stop-loss at 0.6850.
The AUD/USD exchange rate pulled back sharply from a high of 0.7095 on Thursday to the current 0.6965. It will be in the spotlight ahead of the Reserve Bank of Australia (RBA) interest rate decision and US jobs data.
RBA Interest Rate Decision Ahead
The AUD/USD exchange rate retreated after Donald Trump ended the speculation about the next Federal Reserve Chairman. He announced that Kevin Warsh will become the next Chair if he is confirmed by the Senate.
Warsh has been an inflation hawk for a long time, including his criticism of Ben Bernanke’s decision to cut rates and deliver quantitative easing (QE) after the Global Financial Crisis (GFC) in 2011. He also blasted the Fed for cutting rates earlier after the pandemic.
The next key catalyst for the AUD/USD exchange rate will be the upcoming Reserve Bank of Australia (RBA) interest rate decision on Tuesday. Economists believe that the bank will hike interest rates by 0.25% in this meeting because of the recent macro data.
The numbers showed that the economy created thousands of jobs in December, while the unemployment rate continued falling. Another report showed that the country’s inflation continued rising in the same month. It remained above 3% in December, higher than the RBA target of 2.0%.
The bank will also maintain a hawkish tone in a bid to turn inflation downward. Australia will then release more macro data later this week, including manufacturing and trade numbers.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate pulled back from a high of 0.7095 to 0.6963. It retreated after forming an evening star candlestick pattern, which is made up of a small body and an upper shadow. An evening star is one of the most bearish patterns in technical analysis.
The pair has moved below the top of trading range of the Murrey Math Lines, while the Relative Strength Index (RSI) has moved from the overbought level of 84 to the current 70.
Therefore, the pair will likely continue falling as sellers target the key support level at 0.6850. A move above the resistance level at 0.7095 will invalidate the bearish outlook.