Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.6980.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6980.
Add a stop-loss at 0.7200.
The AUD/USD exchange rate moved sideways after the Reserve Bank of Australia (RBA) decision and the weak Chinese macro data. It was trading at 0.7070 on June 17, down from the year-to-date high of 0.7273.
US Retail Sales and Fed Interest Rate Decision
The AUD/USD pair moved sideways after the RBA delivered its interest rate decision. In her statement, Michele Bullock, the bank’s governor, decided to leave rates unchanged at 4.35%.
This decision was in line with what analysts were expecting, which explains why Australian assets were little changed. For example, the ASX 200 Index rose modestly to 8,912, while Australian bond yields retreated, with the ten-year hitting 4.75%.
Bullock also noted that the bank will be prepared to hike interest rates again if inflation remains at an elevated level. On the positive side, the most recent data showed that inflation is falling. Also, crude oil prices continued falling today, with Brent falling below the key support of $80. This retreat may continue if the Strait of Hormuz reopening happens.
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The AUD/USD pair will next react to the upcoming US retail sales data. Economists expect the data to show that sales remained strong in May despite the ongoing economic woes. The average estimate is that sales rose by 0.5% in May on a MoM basis. They also expect the report to reveal that sales rose by 4.0% YoY.
These numbers will come a few hours before the Federal Reserve delivers its interest rate decision. Economists expect the bank to leave rates unchanged between 3.50% and 3.75%.
The most important catalyst for the pair will be the statement from Kevin Warsh, the new Federal Reserve Chair. His statement will help economists to predict what the bank will do this year.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has remained inside a narrow range in the past few days. It was trading at 0.7065, a few points above this month’s low of 0.6978.
The pair is oscillating along the 23.6% Fibonacci Retracement level. This retracement connects the lowest point in November last year and the highest point this year.
It has also formed a large inverted head-and-shoulders pattern, a common bullish reversal sign. Therefore, there is a likelihood that the pair will jump to the key resistance at 0.7200. However, a drop below the support at 0.7000 will invalidate the bullish outlook.
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