Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6290.
- Add a stop-loss at 0.6435.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6435.
- Add a stop-loss at 0.6290.
The AUD/USD pair wavered on Wednesday morning as the market anticipated the upcoming Federal Reserve interest rate decision and Australian jobs numbers. It was trading at 0.6362, higher than the year-to-date low of 0.6090.
Fed decision and Australia jobs data
The AUD/USD pair held steady as market participants focused on the upcoming interest rate decision. This will be an important meeting because it will be the first one since Donald Trump started implementing tariffs on the biggest US trading partners like Mexico, Canada, and China. He also implemented a universal 25% tariff on imported steel and alumunium.
These actions will likely change the Fed’s calculus because they will have an impact on the economic growth and inflation. Economists expect that the slowing consumer confidence will hurt spending, which will affect the country’s GDP growth.
The tariffs will also be passed on the consumer, leading to higher inflation. The end result is a situation where the US will move to a stagflation, a period characterized by slow growth and high inflation
Stagflation is more difficult to manage than a recession since the central bank needs to select a key priority area. While cutting interest rates may boost the economic growth, it risks stimulating inflation. Therefore, the accompanying dot plot will help to predict the next Fed actions.
The AUD/USD pair will react to the upcoming Australian jobs numbers scheduled on Thursday. Economists expect these numbers to show that the unemployment rate remained unchanged at 4.1%, while the participation rate remained at 67.3%. The average estimate is that the economy created 31.4k jobs during the month.
These numbers will help the Reserve Bank of Australia (RBA) when making its decision on April 1. The most likely scenario is where it slashes interest rates for the second consecutive meeting.
AUD/USD technical analysis
The AUD/USD exchange rate wavered after hitting the key resistance level at 0.6390 this week. It has formed a double-top pattern, a popular bearish sign in technical analysis.
The pair has also formed an ascending channel and is slightly below the upper side. It is also consolidating at the 100-day moving average.
The AUD/USD exchange rate has formed a bearish flag pattern, a popular continuation sign. Therefore, the pair wil likely have a bearish breakdown as sellers target the key support at 0.6260, the lowest swing on March 11.
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