Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.6950.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6950.
Add a stop-loss at 0.7200.
The Australian dollar was fairly unchanged on Thursday as energy prices remained elevated amid the Iran war. The AUD/USD pair was trading at 0.7045, down from the year-to-date high of 0.7182 after the Federal Reserve and Reserve Bank of Australia (RBA) interest rate decisions.
RBA and Federal Reserve Interest Rate Decisions
The AUD/USD pair wavered after the latest RBA and Federal Reserve interest rate decisions this week.
In a statement on Tuesday, the RBA decided to hike interest rates by 0.25% to 4.1%. It was its second consecutive rate hike, with officials warning about inflation, which has continued rising in the past few months.
A report released on Thursday showed that Australia's labor market was mixed in February. According to the Australian Bureau of Statistics (ABS), the economy added over 48k jobs in February, with most of them being part-time jobs. The unemployment rate rose slightly to 4.3%from the previous 4.1%.
The pair also remained unchanged after the latest Federal Reserve interest rate decision on Wednesday. In a statement, the bank decided to leave rates unchanged between 3.50% and 3.75%.
Officials, especially Jerome Powell, hinted that the Fed was still observing the impact of the ongoing Iran war on inflation. This war has led to soaring transport and energy prices, with Brent, the global benchmark, rising to the key resistance level at $110. Natural gas and fertilizer prices have continued rising this month.
Therefore, there is a likelihood that the Fed will not cut interest rates anytime soon. Instead, there is fear that the bank’s next move will be a hike as inflation remains stubbornly high. A report released on Wednesday showed that the headline Producer Price Index (PPI) rose 3.4% in February.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair was stuck in a narrow range since January this year. It was trading at 0.7040 on Thursday, slightly below the year-to-date high of 0.7181.
The pair has held steady slightly above the 50-day Exponential Moving Average (EMA). It also formed a bullish flag pattern, which is made up of a vertical line and a horizontal channel
The pair will likely remain steady in the coming days or weeks. If this happens, the next key resistance level to watch will be at 0.7200. On the other hand, a drop below the key support level at 0.7000 will invalidate the bullish outlook.