Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6700.
The AUD/USD exchange rate was little changed on Monday morning as traders waited for the upcoming Reserve Bank of Australia (RBA) interest rate decision. The pair was trading at 0.6550, a few points below the year-to-date high of 0.6590. It remains about 10% above the lowest level this year.
RBA interest rate decision ahead
The AUD/USD pair will be in the spotlight this week as the RBA concludes its two-day meeting on Tuesday. Economists have a mixed outlook for the decision, with some expecting it to leave them unchanged and others expecting a rate cut.
Proponents of leaving interest rates unchanged argue that this decision will allow officials to assess inflation trends. On the other hand, those supporting a rate cut point to the recent inflation and retail sales trends.
A recent report showed that Australia’s inflation dropped to the lowest level in over three years. The monthly CPI rose 2.2% in May, down from 2.4% in the previous month.
The closely-watched trimmed mean core inflation increased by 2.4% in May, which is inside the bank’s 2-3% target band. Inflation has continued falling in the past few months, and analysts expect the trend to continue.
Therefore, the bank may decide to cut rates for the third consecutive time, bringing the benchmark rate to 3.85%. This explains why the government bond yields have continued falling this year.
The AUD/USD pair will also react to Donald Trump’s deadline for his Liberation Day tariffs. While Australia is less exposed to the United States, the government hopes for a deal.
AUD/USD technical analysis
The daily chart shows that the AUD/USD exchange rate has been in an uptrend in the past few months. It has moved from a low 0.5915 in April to the year-to-date high of 0.6590. This surge happened as the US dollar index continued its downtrend.
The pair has formed an ascending channel, which connects the lowest and highest swings since April 16. It has moved slightly below the upper side of this channel.
It remains above the 50-day and 100-day moving averages and the 50% Fibonacci Retracement level at 0.6428. Therefore, the pair’s rebound will be confirmed if it moves above the upper side of the channel at 0.6590. A move above that level will point to more gains, potentially to the psychological point at 0.6700.
Ready to trade our free Forex signals? Here are the best forex platforms in Australia to choose from.