Bearish view
Top Regulated Brokers
Sell the AUD/USD pair and set a take-profit at 0.6865.
Add a stop-loss at 0.7030.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7030.
Add a stop-loss at 0.6865.
The AUD/USD pair wavered after the Federal Reserve delivered its interest rate decision and after Australia published a soft consumer inflation report. It was trading at 0.6957 ahead of key US macro data.
Federal Reserve Decision and Australia Inflation Data
The AUD/USD pair wavered after a report showed Australia’s consumer inflation data. According to the Australian Bureau of Statistics (ABS), the headline CPI dropped from 4.1% in Q1 to 3.9% in Q2. The trimmed mean rose slightly from 3.5% in Q1 to 3.6% in Q2, lower than the expected 3.7%. In July, the headline CPI dropped from 4% in May to 3.80% in June, also lower than the sector median of 4.0%.
These numbers, in theory, should reduce the odds that the Reserve Bank of Australia (RBA) will hike interest rates in the next meeting. However, the ongoing US-Iran war has driven crude oil prices higher, with Brent and the West Texas Intermediate (WTI) rose to $87 and $84. As such, the fourth RBA rate hike cannot be ruled out.
The AUD/USD pair also reacted mildly to the latest Federal Reserve interest rate decision. As was widely expected, the Fed decided to leave interest rates unchanged between 3.50% and 3.75%.
What was notable is that some Fed officials voted to hike interest rates in this meeting. As such, this view means that the bank may decide to hike interest rates by 0.25% in the next meeting.
The next AUD/USD news to watch will be the latest personal consumption expenditure (PCE) report. PCE is an important inflation report that looks at prices in both urban and rural areas. Economists expect the report to show that the core PCE softened to 3.3% in June from the previous 3.4%. The headline PCE is expected to drop from 4.1% to 3.7%.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a gradual uptrend in the past few weeks, moving from a low of 0.6864 on June 30 to a high of 0.7027. It formed an ascending channel during this period.
The pair has now moved slightly below the lower side of this ascending channel. It has also moved slightly lower than the 50-day Exponential Moving Average (EMA). At the same time, the Relative Strength Index (RSI) has dropped below the neutral point of 50. Therefore, the pair will likely continue falling, potentially to the June low of 0.6864.