Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7342.
Add a stop-loss at 0.7000.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.7342.
The AUD/USD exchange rate jumped and neared its highest level this year after a report showed that Australia's consumer inflation rose in January this year. It was trading at 0.7120, much higher than the year-to-date low of 0.6420.
Australia Inflation Report Points to RBA and Fed Divergence
The AUD/USD exchange rate held steady after a report by the Australian Bureau of Statistics (ABS) showed that the headline Consumer Price Index (CPI) remained at an elevated level in January this year.
The headline CPI rose 3.8% in January, higher than the median estimate of 3.7%. Also, the trimmed mean inflation rose to 3.4% from the previous 3.3%, while the weighted mean remained at 3.6%.
These numbers mean that the country’s inflation is not coming down, a sign that the Reserve Bank of Australia (RBA) may decide to maintain a hawkish tone in the coming meetings. The bank has already hiked interest rates by 0.25% to 3.85% this year.
Analysts now expect that the bank may decide to hike rates by 0.25% in the next monetary policy meeting to 4%. Rate hikes help to reduce inflation by moderating spending.
An RBA rate hike or extended pause will be a major divergence from what the Federal Reserve is doing. The bank left interest rates unchanged between 3.50% and 3.75% in the last meeting in January. Many officials have hinted that they will support rate cuts later this year if inflation continues falling.
The next AUD/USD news will come out from the United States, which will publish the latest initial and continuing jobless claims report on Thursday.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate continued its rally and is now nearing the year-to-date high of 0.7155. It was trading at 0.7120, much higher than the key support level at 0.6943, its highest level in September 2024.
The pair has remained above the 50-day Exponential Moving Average (EMA) and the Supertrend indicators. It has also risen slightly above the Strong pivot reverse point of the Murrey Math Lines tool.
The Relative Strength Index (RSI) and the MACD indicators have continued rising in the past few days. Therefore, the most likely scenario is where the pair continues rising as bulls target the ultimate resistance level at 0.7325.