Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6380.
- Timeline: 1-3 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6380.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate rose to its highest point since November last year and pulled back after the US published strong consumer confidence data. It rose to 0.6532 and then retreated to 0.6442 as focus now shifts to the upcoming FOMC minutes and US economic numbers.
FOMC minutes ahead
The AUD/USD pair retreated after a report by the Conference Board showed that consumer confidence soared in May as market participants reacted to hopes of a trade deal.
It jumped to 98 from last month’s 85.7, a figure that was much higher than the median estimate of 84. A rising consumer confidence is a positive thing for the US economy as it signals that consumer spending will increase.
The strong confidence report helped to offset other weak numbers released on Tuesday. For example, durable goods orders tumbled by 6.3% in April after rising by 7.6% in the previous month. This decline happened as companies dealt with Donald Trump’s tariffs.
The AUD/USD pair also dropped amid hopes of falling trade tensions between the US and its top trading partners. In a statement on Tuesday, Trump said that the US was making progress on its talks with the European Union, a sign of a potential deal.
Looking ahead, the next key catalyst for the pair will come out during the American session when the Federal Reserve publishes minutes of the last meeting. These minutes will provide more information about what to expect in the coming meetings.
In recent statements, most Fed officials have supported having a wait-and-see approach on interest rates as they observe the impact of Trump’s tariffs on inflation and the economy. Therefore, the minutes may have a muted impact on the US dollar.
AUD/USD technical analysis
The AUD/USD exchange rate peaked at 0.6532 this week and then pulled back to the current 0.6445 after the US consumer confidence report.
It remains above the 50-day moving average and the 50% Fibonacci Retracement point. The pair also remains above the lower side of the ascending channel.
It has also formed an inverse head and shoulders pattern, which often results into a bullish continuation. Therefore, the pair will likely have a bullish breakout in the next few days.
The next target if a breakout happens, is the psychological level at 0.6600. A drop below the 50-day moving average at 0.6660 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.