Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6350.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate remained in a consolidation phase on Thursday as traders reacted to the recent Reserve Bank of Australia (RBA) decision and US credit rating. It was trading at 0.6447, a few points above this week’s low of 0.6393.
RBA decision and US credit rating
The AUD/USD pair wavered as the market reacted to the relatively dovish statement by Australia’s central bank. Officials slashed interest rates by 0.25% to a two-year low of 3.85%.
Most importantly, officials noted that they considered a 0.50% rate cut, a move that would have caught most traders by surprise. That statement means that, barring any major issur, the bank will deliver at least two interest rate cuts this year.
The statement came as recent data showed that the employment situation continues to improve and that inflation has softened. Officials expressed their concens about Donald Trump’s trade war, which will mostly affect the Australian economy mildly.
The AUD/USD exchange rate also reacted to statements by several Fed officials like Raphael Bostic and Susan Collins who emphasized on the need for patience when making the next interest rate decision.
Further, the market is still concerned about the recent US credit rating cut by Moody’s. The agency slashed the rating from triple A to Aa1, matching that of other agencies like S&P Global and Fitch.
The key data to watch today will be the US initial and continuing jobless claims numbers, which will provide more color on the labor market. S&P Global will also publish the flash manufacturing and services PMI data for this month.
AUD/USD technical analysis
The AUD/USD exchange rate remained at 0.6442, down from the year-to-date high of 0.6515. On the daily chart, the pair is hovering at the 50% Fibonacci Retracement level, a few points above the 50-day Exponential Moving Average (EMA).
It has formed an ascending channel and an inverse head and shoulders pattern, a popular bullish reversal sign. Top oscillators like the Relative Strength Index (RSI) and the MACD indicators have moved sideways.
Therefore, the pair will likely remain in this range on Thursday. More gains will be confirmed if it rallies above the key resistance point at 0.6515. A move above that level will point to more gains, potentially to the psychological point at 0.6600. A drop below the support at 0.6350 will invalidate the bullish outlook.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.