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 slumped to the lowest level since April 13 as the US dollar continued its recent rally. It dropped to a low of 0.7083, down sharply from the year-to-date high of 0.7278.
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Australia Jobs Report and Federal Reserve Minutes
The AUD/USD exchange rate plunged sharply this week, continuing a downward trend that started on May 13 when it peaked at 0.7278.
This retreat happened because of the ongoing US dollar rally, with the index crossing the important resistance level at $100 for the first time in months. It has been rising since bottoming at $97.63.
The dollar has jumped in the past few weeks, helped by the rising US inflation and bond yields. For example, data shows that the headline Consumer Price Index (CPI) jumped to 3.8% and the headline Producer Price Index (PPI) to 6%. These numbers have moved further away from the Federal Reserve's target of 2.0%.
The next crucial catalyst for the AUD/USD pair will be the upcoming Federal Reserve minutes, which will provide more information on the last meeting. The bank decided to leave interest rates unchanged between 3.50% and 3.75% in the last meeting. Officials hinted that they will continue holding interest rates steady in the near term.
The AUD/USD pair will next react to the upcoming Australian jobs report, which will provide more information about the strength of the economy. Economists expect the data to show that the unemployment rate remained unchanged at 4.3% in April as it added 15.7k jobs, a slowdown in the previous 17.9k.
The data comes a few days after the RBA delivered minutes of the last meeting. These minutes showed that the bank may consider hiking rates in the next meeting.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair peaked at 0.7278 earlier this month to a low of 0.7077 on Tuesday. It has dropped slightly below the 50-day Exponential Moving Average (EMA).
On the positive side, the pair has formed the highly bullish inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has also remained above the 100-day moving average.
Therefore, there is a likelihood that the pair will rebound in the coming days, with the next key target being at the psychological level of 0.7200. However, a move below the support at 0.7080 will invalidate the bullish outlook.