Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.6900.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6900.
Add a stop-loss at 0.7200.
The AUD/USD exchange rate remained in a tight range after the US and Australia published key macro data. It was trading at 0.7060 on Wednesday, a few points below this month’s high of 0.7155.
Australia Inflation and US Consumer Confidence Report
The AUD/USD pair wavered after the US published the latest consumer confidence report. According to the Conference Board, consumer confidence rose from 89 in January to 91.2 in February. The increase was higher than the consensus estimate was 87.
Rising consumer confidence is a sign that the economy is doing relatively well. Recent data showed that inflation has moderated in the past few months, with the headline CPI falling to 2.4% in January.
The AUD/USD pair reacted to the latest Australian consumer inflation report. Data released by the Australian Bureau of Statistics (ABS) showed that the headline Consumer Price Index (CPI) eased from 3.8% in December to 3.7% in January. It dropped from 1.0% to 0.4% on a month-on-month basis.
The trimmed mean consumer inflation dropped from 3.3% in December to 3.4%. It moved from 0.2% to 0.3% in January on a MoM basis. At the same time, the weighted mean inflation dropped from 3.6% in December to 3.5% in January.
These numbers mean that the country’s inflation remained much higher than the RBA target range of between 2% and 3%. Therefore, there is a likelihood that the Reserve Bank of Australia (RBA) will maintain a hawkish tone.
While the bank may not hike rates, it may maintain the current ones in the coming meetings. Such a move will deviate from the Federal Reserve, which is expected to cut interest rates later this year.
AUD/USD Technical Analysis
The weekly chart shows that the AUD/USD pair has remained in a strong uptrend in the past few months. It has risen from a low of 0.5916 last year to the current 0.7070.
The pair has moved above the key resistance level at 0.6943, the neckline of the inverted head-and-shoulders pattern. It has also formed a mini golden cross as the 100-week and 50-week moving averages have crossed each other.
Therefore, the pair will likely continue rising as bulls target the key resistance level at 0.7200. A drop below the key support level at 0.6945 will invalidate the bullish outlook.