Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.7100.
- 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 0.7100.
The AUD/USD exchange rate jumped after the Reservation Bank of Australia (RBA) delivered its interest rate decision on Tuesday. It jumped to a high of 0.700, up sharply from this week's low of 0.6900
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RBA Raised Interest Rates
The AUD/USD exchange rate has been in a strong uptrend in the past few weeks as odds of a divergence between the Reserve Bank of Australia (RBA) and the Federal Reserve rose.
In a statement on Tuesday, the RBA delivered a highly hawkish interest rate decision. It hiked interest rates by 0.25% to 3.85% in a bid to fight the elevated inflation rate.
The rate hike made it an outlier as most central banks are cutting interest rates. For example, the Federal Reserve has delivered three interest rate cuts in the past few months and analysts believe that the bank will deliver more cuts this year.
The RBA rate hike came after recent data showed that the labor market has improved, while inflation has jumped to over 3%, much higher than the bank's target of 2.0%.
Analysts at some of the biggest banks predicted that the bank may hike interest rates again in May this year as the economy runs close to capacity. A report released on Monday even showed that job advertisements jumped to the highest level since February 2022.
The AUD/USD exchange rate will next react to the upcoming service PMI numbers, which will provide more information about the health of the American economy. Economists expect the data to show that the ISM services PMI slipped to 53.5 from the previous 54.4.
The pair will also react to the upcoming ADP jobs report. Economists expect the data to show that the previous sector created over 48k jobs in January after adding over 45k a month earlier.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair has been in a strong uptrend in the past few months. It jumped from a low 0.6416 in December to a high of 0.7095.
The pair recently rose above the key resistance level at 0.6707, its highest level on September 17. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA).
The pair formed a doji candlestick pattern on Monday. The pair will likely continue rising as bulls target the year-to-date high of 0.7095. A move above that level will point to more gains, potentially to 0.7000.