Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.6900.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6900.
Add a stop-loss at 0.7050.
The AUD/USD pair slid to its lowest level since July before stabilizing at 0.6953, following a run of mixed economic data from the US and Australia. The pair initially dropped to 0.6900 before rebounding.
Aussie Sell-Off Eases
The AUD/USD pair was in the spotlight last week as Australia released key macro data and the Reserve Bank of Australia (RBA) delivered its interest rate decision. As widely expected, the bank hiked interest rates by 0.25% to the highest level in 15 years to combat elevated inflation.
The Australian Bureau of Statistics (ABS) published a strong inflation report, raising the possibility that the central bank may decide to hike interest rates again. The headline consumer inflation rose to 4% as energy and housing prices rose. Traders believe that the central bank may decide to hike interest rates by 0.25% again this year, which would mark the fifth rate hike of the year.
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The AUD/USD pair still dropped after these events as investors focused on the US dollar aspect. Most traders believed that the Fed would need to hike interest rates later this year. However, this changed after the US released the latest inflation and jobs reports. The inflation report showed that the headline and core PCE softened a bit last month.
These numbers suggested that the Federal Reserve will decide to leave interest rates unchanged for the remainder of the year unless the situation changed. The report showed that the economy created just 29k jobs in September, much lower than the expected increase of 85k. Also, the unemployment rate rose to 4.2% last month.
The AUD/USD pair will next react to the upcoming Federal Reserve minutes on Wednesday. These minutes will provide more insight into what to expect in the next meetings.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has retreated in the past few weeks, moving from a high of 0.7234 to the current 0.6953. It has slumped below the Strong, Pivot, Reverse level of the Murrey Math Lines tool.
The pair has dropped below the 50-day Exponential Moving Average (EMA), a sign that bears have prevailed. It also remained below the Supertrend indicator, a sign that bears have prevailed.
Therefore, the pair will likely have a brief rebound, potentially to 0.7050 and then it will resume the downward trend.
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