Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6600.
• Add a stop-loss at 0.6450.
• Timeline: 1-2 days.

Bearish view

• Set a sell-stop at 0.6500 and a take-profit at 0.6450.
• Add a stop-loss at 0.6570.

(Click on image to enlarge)

The AUD/USD exchange rate retreated in the overnight session as the bond market predicted that the Reserve Bank of Australia (RBA) would cut interest rates at least once this year. It moved to 0.6530, down from this week’s high of 0.6575.

Reserve Bank of Australia cuts

The AUD/USD was the top pair this week as the RBA delivered its interest rate decision on Tuesday. In it, the bank decided to leave interest rates unchanged at 4.35% and hinted that it would maintain higher rates for longer.

In her press conference, Governor Bullock noted that the bank discussed hiking in this meeting. She reiterated this view in a statement on Thursday morning.

However, the bond market is hinting that the bank may start cutting rates as soon as in December. The 10-year yield retreated slightly to 4.16% on Thursday morning.

Still, the RBA is expected to be among the last central banks to start cutting interest rates. The Fed has left the door for a September rate cut open while other banks like the European Central Bank (ECB) and the Bank of England have slashed.

The AUD/USD pair also reacted to the latest Chinese trade numbers. In a statement, the government said that the trade surplus dropped to $85 billion as exports slowed to 7.0% from the previous 8.6%. Imports rose by 7.2% after falling by 2.3% in June.

The only data to watch on Thursday will be the weekly US jobless claims numbers. These numbers are expected to reveal that claims retreated from 249,000 to 241,000 last week. A sign that the number of claims rose will raise the possibility of Fed cuts.

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AUD/USD technical analysis

The AUD/USD exchange rate retreated to a low of 0.6520 in the Australian session. This retreat happened after the pair retested the key resistance point at 0.6575 on Wednesday. It is consolidating at the 50-period and 25-period moving averages.

Most notably, the pair has also formed an inverse head and shoulders pattern, which is a popular bullish sign. Its neckline is at the 0.6575 resistance point.

Therefore, the pair will likely bounce back as the RBA and Federal Reserve sentiment diverge. This rebound will only be confirmed if the pair moves above the neckline at 0.6575. If this happens, the next point to watch will be at 0.6600.

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