Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6700.
• Add a stop-loss at 0.6580.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 0.6625 and a take-profit at 0.6570.
• Add a stop-loss at 0.6700.

(Click on image to enlarge)

The AUD/USD exchange rate continued its strong recovery after a series of important economic data from Australia and the United States. The pair soared to the important resistance point at 0.6631, its highest point since July 23rd.
 

US inflation data ahead

The Australian dollar rallied after the latest consumer sentiment and wage growth data from the country. The Westpac consumer sentiment rose to 2.8% in August after falling by 1.1% in the previous month. This increase as better than the median estimate of 0.5%.

Meanwhile, Australia’s wage growth was lower than the median expectations. The wage price index retreated from 0.9% in Q1 to 0.8% in Q2. This retreat translated to a 4.1% annualized growth rate.

The wage growth figure is an important one because it has an impact on inflation. A lower growth means that inflation will likely retreat, which will help the RBA avoid an interest rate hike or a hawkish tone. Just last week, Michele Bullock, the bank’s governor reiterated that the RBA would not hesitate to hike rates if inflation rises.

The next key economic data to watch from Australia will be the country’s jobs numbers scheduled on Thursday morning.

Meanwhile, the Producer Price Index (PPI) data showed that inflation softened in July. The headline PPI retreated from 2.7% in June to 2.2% on July and from 0.2% to 0.1% on a MoM basis, respectively. The core PPP fell from 3.0% to 2.4% in July, also lower than the median estimate of 2.7%

The next important data to watch will be the consumer price index (CPI) data. With the sharp drop in the PPI, there are chances that the CPI numbers also retreated in July. A lower inflation reading will increase the chances of a rate cut in September.
 

AUD/USD technical analysis

The Australian dollar continued rising after the US PPI data. It rose to a high of 0.6632, its highest point since July.

On the 4H chart, the pair flipped the important resistance at 0.6567, the neckline of the inverse head and shoulders pattern. It has also risen above the 61.8% Fibonacci Retracement point while the Relative Strength Index (RSI) and the MACD have continued rising.

Therefore, the pair will likely continue rising as traders target the 78.6% retracement point at 0.6700.

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