Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate remained within an ascending channel after the Reserve Bank of Australia (RBA) minutes, and as traders awaited a statement by Jerome Powell, the Fed Chair. It was trading at 0.6525, up from this month’s low of 0.6454.
RBA Minutes and Fed Chair Statement
The AUD/USD exchange rate rose after the RBA released minutes from its last meeting. These minutes provided more information about the last meeting in which officials caught analysts off guard by leaving interest rates unchanged at 3.85%.
Most analysts expected the bank to cut interest rates by 0.25% since inflation and the labor market were stabilizing. The minutes showed that most officials believed that it was wise to wait for the second-quarter inflation report first before delivering the interest rate cut.
They also confirmed that they will restart cutting rates if inflation continues falling towards the 25 target. The minutes came after a recent report showed that consumer confidence rise in July as households’ assessment of their financial position improved. Sentiment rose by 0.6% to 93.1 points even after the RBA maintained high interest rates.
The next key AUD/USD catalyst will come from the United States, where Jerome Powell, the Fed Chair, will deliver a speech. His speech comes as the bank faces substantial pressure from Donald Trump, who has called for more aggressive interest rate cuts.
Christopher Waller, a top Federal Reserve governor, has also suggested that the bank should cut interest rates at its July meeting. Michele Bullock, another Fed official who has suggested that the bank should cut rates, will also have a speech today.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate has been in a strong uptrend in the past few months. It has formed an ascending channel, whose two lines connect the highest and lowest swings since April 14 this year.
The AUD/USD pair has moved above the 50% Fibonacci Retracement level. It has also moved above the 50-day and 25-day Exponential Moving Averages (EMA), a sign that bulls are in control.
The pair will likely remain in this channel in the coming days. If this happens, the next point to watch will be the psychological point at 0.6600. A move below the support at 0.6460 will invalidate the bullish view.
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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.