Bullish View
- Buy the AUD/USD and set a take-profit at 0.7200.
- Add a stop-loss at 0.7100.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7115 and a take-profit at 0.7080.
- Add a stop-loss at 0.7200.
The AUD/USD pair has been in a tight range in the past few days as investors assess the actions of the Reserve Bank of Australia (RBA) and the Federal Reserve. The pair is trading at 0.7133, which is slightly below this week’s high of 0.7140.
RBA and Fed Decisions
The AUD/USD has risen sharply in the past few weeks. The pair has risen from the year-to-date low of 0.6968 to a high of 0.7140.
The jump happened as investors reacted to the actions by the RBA and the Fed. Two weeks ago, the Fed decided to leave interest rates unchanged. But the bank also hinted that it will start hiking interest rates in March.
The RBA concluded its meeting last week and also left rates intact and ended its asset purchases. In a separate speech, the bank’s governor hinted that rate hikes will likely keep rising later this year. He reiterated that the bank will continue being data-dependent.
As a result, based on recent data, analysts have started pricing in a rate hike later this year. Some analysts even believe that the RBA will implement a rate hike before the European Central Bank.
That is simply because economic numbers from Australia have been relatively strong. For example, the services PMI figure published on Monday was better than expected. It also moved from the contraction zone of 46 to above 50.
Similarly, the recent retail sales and inflation numbers were also strong. The unemployment rate has also been in a downward trend and the situation will improve now that the government has announced its reopening plans. In a statement on Monday, the government said that it will allow double-vaccinated foreigners in the country.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has made a spectacular recovery in the past few days. However, in the past few days, it has struggled to find direction partly because the Fed and the RBA are on the same page. It has moved slightly above the 25-day and 50-day moving averages. The pair is also slightly below the 50% Fibonacci retracement level.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 0.7200. This breakout will likely happen before or after the upcoming US inflation data that comes tomorrow.
