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 under pressure after the Reserve Bank of Australia (RBA) published minutes of the last meeting and as investors embraced a risk-off sentiment. It dropped to 0.6490, down from the year-to-date high of 0.6700.
RBA and Fed Interest Rate Minutes
The AUD/USD pair reacted mildly to the latest RBA minutes of the last monetary policy meeting. In that meeting, the bank caught investors off guard by deciding to leave interest rates unchanged at 3.6% after delivering three cuts earlier this year.
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The minutes showed that officials remained concerned about the country's inflation, which has remained at an elevated level in the past few months. A recent report by the Bureau of Labor Statistics (BLS) showed that inflation remained above 3% in the fourth quarter.
As such, officials believe that more cuts will lead to higher inflation. The bank also believes that the economy is running close to capacity, with the labor market being strong. A report released last week showed that the unemployment rate remained at 4.3%, with employment rising to 14.68 million.
The AUD/USD exchange will next react to the upcoming Federal Reserve minutes, which will come out on Wednesday this week. These minutes will provide more information on the economy and what officials expect in the coming meetings.
The pair will also react to the upcoming US jobs report, which will come out on Thursday. This report will only include the nonfarm payroll count and not the unemployment rate.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD exchange rate has remained under pressure in the past few weeks. It has dropped from the year-to-date high of 0.6700 to the current 0.6490.
The pair has moved below the 50-day Exponential Moving Average (EMA). It has moved below the Supertrend indicator, a sign that bears remains in control.
Also, the Relative Strength Index (RSI) and the MACD indicators have continued falling. It has formed the head-and-shoulders pattern, a sign that bears are in control.
Therefore, the pair will likely continue falling as sellers target the next key support at 0.6400. A move above the resistance level at 0.6600 will invalidate the bearish outlook.
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