Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6400.
The AUD/USD exchange rate remained unchanged on Thursday as the US dollar declined amid expectations that the Federal Reserve would cut interest rates at its upcoming September meeting. It rose from a low of 0.6425 to the psychological point at 0.6500.
US Dollar Index is Slumping
The AUD/USD pair drifted upwards as traders reacted to the falling US dollar. Data shows that the US Dollar Index (DXY) dropped to a low of $98.2 from this month’s high of $100.20.
The main reason for the US dollar sell-off is that market participants, buoyed by recent statements by Federal Reserve officials, hinted that th bank will cut interest rates in the upcoming meeting.
The case for a Fed cut in September rose after the US published a weak labor report last week. According to the Bureau of Labor Statistics (BLS), the economy created just 73,000 jobs in July, significantly lower than the 114,000 jobs analysts had expected.
The BLS also downgraded the previous two months’ job reports, which showed that the economy created an average of 35,000 jobs a month.
In a statement about these numbers, Lisa Cook, a Fed official said that they were a turning point and that it was appropriate for the Fed to start cutting rates.
Most analysts now expect the bank to cut rates in the September meeting in a bid to supercharge the economy.
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The AUD/USD pair also reacted to the recent Australian consumer inflation report. That data showed that the headline consumer inflation data plunged to 2.1% in the second quarter from 2.4% in Q1. The trimmed mean CPI fell to 2.7%, its lowest level in years.
These numbers indicate that the RBA will likely opt to cut interest rates at its next meeting, scheduled for next week.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate bottomed at 0.6425 on July 31 and is currently 0.6500. It has moved to the 50-day moving average and is slightly below the lower side of the ascending channel.
The pair remains below the 61.8% Fibonacci Retracement point at 0.6550. The most likely scenario is where the pair will resume the downtrend and retest the support at 0.6425. A move below that support will point to more downside to 0.6400.
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