Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6965.
- Add a stop-loss at 0.7125.
- Timeline: 1-3 days.
Bullish view
- Set a buy-stop at 0.7095 and a take-profit at 0.7150.
- Add a stop-loss at 0.6950.
The AUD/USD pulled back on Tuesday morning ahead of a busy market as key central banks are set to publish their first decisions of the year. There will also be important economic data from the US and Australia.
AUD/USD daily chart analysis
The main driver for the Australian dollar to USD rate will be the upcoming American consumer confidence data, Fed decision, and Non-Farm Payrolls (NFP) data.
Consumer confidence numbers, which will come out on Tuesday are expected to show that confidence among consumers rose in January because of the improving inflation situation. Confidence has been in an ascending trendline in the past few months.
At the same time, the Fed is expected to be a bit hawkish in a bid to lower its elevated inflation. It will hike by 0.50% for the second straight month and hint that it will continue rising interest rates until inflation moves to the target of 2%.
On the daily chart, we see that the pair has been in a strong bullish trend in the past few days. It has moved to the 61.8% Fibonacci Retracement level. The upward trend is being supported by the 50-day and 25-day EMAs. At the same time, the Relative Strength Index (RSI) has continued rising and is approaching the overbought level.
Therefore, the pair will likely continue rising as buyers target the 78.2% Fibonacci Retracement level. The stop-loss of this trade will be at 0.6895.
AUD/USD 4H chart analysis
On the 4H chart, the pair has moved below the ascending trendline shown in black that connects the highest levels since from December 20. It has failed to move above this level numerous times since then. It has also moved below the lower side of the Bollinger Bands and dropped below the 25-day moving average.
The Relative Strength Index has moved below the neutral level of 50 and is currently at 44. Therefore, the short-term outlook for the pair is bearish, with the next reference point being at 0.6965, the lowest point on January 23.
On the flip side, a move above the important resistance point at 0.7135, will signal that there are still more buyers in the market. If this happens, the bearish view will become invalid and push the pair to above 0.7200.
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