Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6300.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6600.
The AUD/USD pair pulled back as the US dollar rally continued after the latest Federal Reserve minutes. It dropped to a low of 0.6420, down from this week’s high of 0.6540.
US Dollar Rallies After FOMC Minutes
The AUD/USD pair retreated after the Federal Reserve published minutes of the recent monetary policy meeting. These minutes revealed that, as expected, the bank was not in a hurry to start cutting interest rates as officials assessed the impact of tariffs on the US economy.
Officials, including Jerome Powell, believe that the tariffs will have a major impact on the US economy. Precisely, they expect that the tariffs will lead to a higher inflation as companies are forced to adjust their prices upwards.
Some companies have started hiking prices. For example, firms like Temu and Shein have hiked prices because of the ending of the de minimis, which allowed them to ship small packages without paying for tariffs.
The Fed also expect that tariffs will lead to a higher unemployment rate as companies announce layoffs.
Looking ahead, the next important data to watch will be the second reading of the first quarter GDP data. The first estimate showed that the economy contracted by 0.4% in Q1 as the threat of tariff loomed.
The US willl then publish last week’s initial and continuing jobless claims data. It will also release last month’s pending home sales numbers.
The most important report will come out on Friday when it publishes the personal consumption expenditure (PCE) data. This is a key report that looks at the country’s inflation in the rural and urban centers and is the Fed’s favorite inflation number.
The AUD/USD pair will also react to the latest retail sales and private sector credit data scheduled on Friday.
AUD/USD technical analysis
The AUD/USD pair has bounced back from last month’s low of 0.5915 to 0.6425 today. It is being supported by the 50-day moving average, which has supported it since last month.
The pair remains below the ascending trendline that connects the highest swings since February. This trendline is the neckline of the inverse head and shoulders pattern, a popular bullish reversal sign.
Therefore, more AUD/USD gains will be confirmed if the pair rises above the ascending trendline. If this happens, the next point to watch will be the psychological point at 0.6600.
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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.