Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.7050.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.7200.
AUD/USD pair rose modestly as investors bought the dip following last week’s Federal Reserve interest rate decision. It jumped to 0.7125, up modestly from this month’s low of 0.7075 as focus remains on what the Reserve Bank of Australia (RBA) will do in its next week’s meeting.
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RBA Interest Rate Decision and Australian Jobs Data
The AUD/USD pair rose after the Federal Reserve delivered its interest rate decision, which was unanimous. Officials, including Kevin Warsh, decided to hike interest rates by 0.25%.
The bank decided to do that because of rising inflation, which has remained at a high level in the past few years. The headline Consumer Price Index (CPI) rose 3.4% in August, higher than the 2% target. Core inflation has also remained higher in the past few months.
The challenge, however, is whether the rate hikes will lower inflation. For one, it will not reopen the Strait of Hormuz and the Bab al-Mandab Strait. These straits will be closed for longer as the US-Iran crisis escalates.
The ongoing fighting between Saudi Arabia and Ansar Allah means that petrol and diesel prices will remain high in the foreseeable future. Higher oil prices will then spread across other products.
Most of the focus this week will be on Australia. The country’s statistics agency will publish its jobs numbers on Thursday. Economists expect the data to show that the economy created 29k jobs last month after shedding 15k jobs a month earlier.
These numbers come a few days before the Reserve Bank of Australia (RBA) delivers its interest rate decision. Economists expect that the bank will hike interest rates by 25 basis points. If this happens, it will be the fourth hike this year, making it one of the most hawkish central banks.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has slumped in the past few weeks. It dropped from a high of 0.7238 in August to the current 0.7125.
The pair retreated after forming a rising wedge pattern, one of the most bearish signs in technical analysis.
It has slumped below the 50-day Exponential Moving Average (EMA). Also, it has moved slightly above the Major S/R pivot point of the Murrey Math Lines tool at 0.7080.
Therefore, the pair will likely continue rising as investors wait for the upcoming RBA decision next week. If this happens, the next level to watch will be at 0.7200, the Strong, pivot, reverse level of the Murrey Math Lines.
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