Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
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 0.7200.
The AUD/USD exchange rate continued its recovery amid the ongoing sign of a divergence between the Federal Reserve and the Reserve Bank of Australia (RBA). It rose to 0.7100, up substantially from this week's low of 0.6980.
Federal Reserve and RBA Divergence
The AUD/USD pair rose amid the ongoing divergence between the Federal Reserve and the Reserve Bank of Australia.
In a statement on Wednesday, the RBA delivered the second consecutive interest rate hike of the year. It moved the benchmark rate to 4.1%, its highest level since April last year.
The bank is concerned about inflation, which remained above the 2% and 3% range in the past year. This inflation will likely continue rising in the coming months because of the ongoing Iran war that has pushed crude oil and natural gas prices to the highest point in over two years.
The next important Australian news will be the latest jobs report, which comes out on Thursday. Economists expect the upcoming report to show that the labor market continued growing in February.
The expectation is that the economy created 20.3k jobs in February, higher than the previous month's 17.8k. Also, the unemployment rate is expected to remain unchanged at 4.1%.
The AUD/USD pair will also react to the upcoming Federal Reserve interest rate decision, which will come out later today. Unlike the RBA, analysts expect the bank to hold interest rates steady between 3.50% and 3.75%.
While the bank is concerned about the labor market, which shed 92,000 jobs in February and hiked the unemployment rate to 4.4%, it is more concerned about inflation, which has remained at elevated level in the past few months. The most recent data showed that the headline inflation rose 2.4% in February, and this trend may continue in the near as the Iran war continues.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair rose amid the ongoing Federal Reserve and RBA interest rate divergence. It has risen to 0.7100 from this week's low of 0.6973.
The pair remains above the Ichimoku cloud indicator and the 50-day Exponential Moving Average (EMA). It has also formed a bullish flag pattern, which is made up of a vertical line and a horizontal channel.
Therefore, the pair will likely continue rising as bulls aim for the year-to-date high of 0.7180. A move above that level will point to more gains, potentially to 0.7200.