Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6630.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6630.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate pulled back to a low of 0.6565 on Monday as traders waited for the upcoming Australia consumer inflation data and Federal Reserve interest rate decision. It has retreated by 90 basis points from the highest point this year.
Fed decision and Australia inflation data
The AUD/USD exchange rate retreated ahead a very busy week that will see the Federal Reserve deliver its interest rate decision on Wednesday.
Economists expect the bank to continue its prolonged pause as it observes the impact of Donald Trump’s tariffs on inflation. It has left interest rates unchanged between 4.25% and 4.50% throughout the year, ignoring the ongoing push by the president.
Trump has pushed the Fed to cut rates by as much as 300 basis points, including in his visit to the Federal Reserve last week when he inspected the ongoing renovations.
The AUD/USD exchange rate will also react to several important economic numbers from the United States. The Conference Board will publish the closely-watched consumer confidence report on Tuesday.
Economists expect the report to show that consumer confidence improved from 93 in June to 95 in July, a positive sign for the economy.
The other notable data to watch this week will be the upcoming US GDP report on Wednesday. Economists expect the data to reveal that the economy expanded by 2.5% in Q2 after contracting by 0.5% in the first quarter.
The US will then publish the closely-watched nonfarm payrolls data on Friday and the personal consumption expenditure (PCE) report on Thursday. These numbers will help the Fed to determine when to cut interest rates.
The AUD/USD pair will next react to the closely-watched Australian consumer price inflation data on Wednesday. This report will provide more hints on what to expect in the next meeting.
AUD/USD technical analysis
The daily chart shows that the AUD/USD exchange rate has pulled back in the past few days, moving from a high of 0.6530 to the current 0.6565. It remains inside the ascending channel that started forming in April.
The pair remains above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. However, it has also formed a small evening star candlestick, which is characterized by a small body and an upper shadow. This pattern is one of the most common bearish patterns in technical analysis.
Therefore, the pair may continue falling as sellers target the lower side of the ascending channel at 0.6500. A move above the upper side of the ascending channel will invalidate the bearish 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.