Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6450.
• Add a stop-loss at 0.6250.
• Timeline: 1-2 days.

Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6250.
• Add a stop-loss at 0.6450.

The AUD/USD exchange rate continued rising after the US published weak retail sales data on Friday and as the US dollar weakness accelerated. The pair rose to a high of 0.6370, its highest since December 11. It has jumped by 4.42% from its lowest point this year.

RBA interest rate decision

The AUD/USD exchange rate continued its recovery after the US published mixed economic numbers last week. According to the Bureau of Labor Statistics (BLS), the headline and core consumer prices jumped in January. The headline CPI figure rose from 2.9% to 3.0%, continuing a trend going on for a while.

Another report showed that retail spending softened in January. The headline retail sales dropped by 0.9% in January after rising by 0.7% in December. They slowed from 4.36% to 4.20% on a YoY basis.

Core retail sales also retreated from 0.7% to 0.4%. That is a sign that the US economy is slowing a trend that may continue if Donald Trump goes ahead with his tariffs. He has hinted that tariffs on Canada and Mexico will go on in March, while China’s 10% have already started. Tariffs slow the economy by reducing consumer spending and by reducing their purchasing power.

The next key AUD/USD news will come out on Tuesday when the Reserve Bank of Australia (RBA) publishes its interest rate decision. Economists expect the bank to slash interest rates by 0.25% to 4.10%. That will be the first time that the bank has hiked interest rates since 2020 when it slashed them to deal with the Covid-19 pandemic.

Analysts expect that the RBA will be more dovish going forward since the economy is slowing and risks are rising.

AUD/USD technical analysis

The AUD/USD pair bottomed at 0.6080 earlier this month and then rebounded to 0,6370, its highest point since December 12. It has moved above the 23.6% Fibonacci Retracement level and the 50-day moving average.

The pair has formed an inverse head and shoulders pattern, a popular bullish reversal point. It has risen above the neckline at 0.6330. The Average Directional Index (ADX) has tilted upwards, a sign that the trend is strengthening.

Therefore, the pair will likely keep rising as bulls target the next psychological point at 0.6450, the 38.2% retracement level.

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