Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6900.
Add a stop-loss at 0.7100.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.6900.
The AUD/USD exchange rate dropped for three consecutive weeks as traders waited for the upcoming Reserve Bank of Australia (RBA) interest rate decision. It dropped to 0.7023, its lowest level since August 3, and is down by nearly 3% from its highest level this month.
RBA Expected to Hike Interest Rates
AUD/USD pair retreated as market participants waited for the RBA interest rate decision on Tuesday. This report comes at a time when the Australian economy is doing relatively well, with the number of jobs additions continuing to rise.
The Australian economy added 39,500 jobs last month, higher than the median estimate of 20,000. This data suggested that the economy was doing well, even as the unemployment rate rose slightly to 4.6%.
Australia, like other countries, has seen its inflation remain above the 2% target. A report coming out on Wednesday is expected to show that Australia’s inflation rose 4.10% in August from 3.50% in July.
Therefore, most economists believe that the RBA will decide to hike interest rates at this meeting. If this happens, it will bring rates to 4.65% in its fourth rate hike of the year.
The AUD/USD pair will react to other key events this week. For example, some key Federal Reserve officials like Lisa Cook and Tom Barkin will talk today, shedding light on their expectations for rate hikes this year.
Conference Board will publish the latest consumer confidence report on Tuesday. This is an important metric because consumer spending is the biggest part of the US economy. The other key metrics to watch this week will be the JOLTS job openings on Tuesday, PCE inflation on Thursday, and nonfarm payrolls data on Friday.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has slumped in the past few days, moving from a high of 0.7237 on September 9 to the current 0.7023. It has slumped below the 50-day Exponential Moving Average (EMA).
At the same time, the pair has moved to the lower side of the Bollinger Bands. The Relative Strength Index (RSI) has continued falling and is nearing the oversold level of 30. Other oscillators like the MACD and the Stochastic Oscillator have continued falling.
Therefore, the path of the least resistance is bearish, with the next key target to watch being 0.6900. This view will be confirmed if it drops below the key support at 0.7000.
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