Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.7250.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.700.
The AUD/USD exchange rate remained in a narrow range on Monday ahead of the upcoming Australian inflation report and the Federal Reserve interest rate decision. It was trading at 0.7150 on Monday, down from the year-to-date high of 0.7225.
Australia Inflation Data and Federal Reserve Decision
The AUD/USD exchange rate held steady ahead of the upcoming Australian consumer inflation report, which will provide data on Wednesday. These numbers will provide more information about the impact of the ongoing war on the Australian economy.
The headline consumer price index (CPI) is expected to come in at 4.7%, a big increase from 3.7% in fourth quarter of last year. The trimmed mean inflation is expected to rise from 3.4% to 3.5%, while the weighted mean inflation is expected to rise 3.5%.
The Reserve Bank of Australia (RBA) will, therefore, maintain a hawkish tone in the upcoming meeting. It has been the most hawkish of the central banks after hiking interest rates two times this year.
Meanwhile, the AUD/USD pair will also react to the upcoming US macro data from the United States, starting with the latest house price index and consumer confidence on Tuesday. Economists expect the data to show that the house price index rose 1.6%, while the consumer confidence fell to 89.5 from the previous 91.8.
The US will also release the latest housing starts, durable goods, and building permits report on Wednesday. It will also release the latest GDP report on Thursday, with the economy expected to have grown by 2.1% after growing by 0.4%.
The EUR/USD pair will also react to the upcoming Federal Reserve interest rate decision on Wednesday. Economists believe that the bank will leave interest rates unchanged between 3.50% and 3.75%.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair has rebounded from a low of 0.6830 in March this year to a multi-year high of 0.7218.
It then pulled back slightly to the current 0.7150. Most notably, it has formed a double-top pattern, a common bearish reversal sign in technical analysis.
The pair has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It is also slightly above the Supertrend indicator.
Therefore, because of the double-top pattern, the pair may retreat soon, potentially to the psychological level of 0.7000. On the other hand, a move above the year-to-date high of 0.7225 will invalidate the bearish outlook.