Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7150.
Add a stop-loss at 0.6950.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6950.
Add a stop-loss at 0.7150.
The AUD/USD exchange rate jumped to its highest level since June 17 as traders focused on the upcoming Reserve Bank of Australia (RBA) interest rate decision and the US consumer inflation report. It has soared by nearly 3% from its lowest level in June.
RBA Interest Rate Decision
The AUD/USD pair jumped after the US published a weak jobs report. According to the Bureau of Labor Statistics (BLS), the labor market worsened last month, shedding 23k jobs. Economists were expecting the report to show that the economy added 85k jobs a month earlier.
Most notably, the agency revised the previous month’s jobs numbers downwards, a sign that the labor market is not doing well. As a result, US bond yields dropped as investors scaled down their interest rate hike expectations.
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The next important AUD/USD news will be the upcoming US consumer inflation report. Economists expect the data to show that US inflation softened a bit last month as crude oil and natural gas prices dropped.
The other key catalyst for the pair will be the upcoming Reserve Bank of Australia (RBA) interest rate decision. Economists expect the bank to leave interest rates unchanged at 4.35%, with officials maintaining their openness to hiking interest rates.
The bank has been one of the most hawkish central banks in the market this year. It has already delivered three rate hikes this year, and Polymarket odds are that it will hike rates again later this year.
The most recent data showed that Australia’s inflation rate eased to 3.8% in the 12 months to June this year from the previous 4%. Core inflation remains sticky and above the RBA’s target of 2.0%. As such, the bank may have the incentive to either hike rates or leave them unchanged for longer.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in an uptrend in the past few weeks. It formed an ascending channel and is now along the upper side.
The pair has moved slightly above the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has already crossed the neutral level of 50 and is pointing upwards.
Therefore, the potential RBA and Fed divergence may push it higher in the coming days. If this happens, it may jump to the next key resistance at 0.7150. The alternative scenario is where it resumes the downtrend and retests the lower side of the channel.
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