Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6400.
• Add a stop-loss at 0.6200.
• Timeline: 1-2 days.

Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6200.
• Add a stop-loss at 0.6400.

(Click on image to enlarge)

The AUD/USD exchange rate held steady on Wednesday morning, hours after Jerome Powell, the Federal Reserve was questioned in the US Senate. The pair moved to the key resistance level at 0.6290, up from this month’s low of 0.6080.

Hawkish Federal Reserve tone

The AUD/USD pair has done well in the past few days, a trend that continued after Powell hinted that that the Fed was not in a hurry to cut rates as Donald Trump has suggested.

He reiterated that the US was doing well, with the unemployment rate being stable. As such, he believes that the economy will be able to sustain the economic growth.

Powell and other Fed officials are concerned that delivering more interest rate cuts will stimulate inflation in the country at a time when prices are not falling fast enough.

The headline inflation has moved further away from the 2% target rate, while the core CPI is steady above 3%. Therefore, economists expect the Fed to restart interest rate cuts in its July meeting.

The Reserve Bank of Australia (RBA), on the other hand, is expected to change its tune now that inflation has fallen and economic risks have remained. Recent data showed that the headline, weighed, and trimmed mean inflation dropped in the fourth quarter.

These inflation trends will likely push the RBA to start cutting interest rates this year. Besides, there are concerns about the economic slowdown now that Donald Trump has started his trade war. He has imposed tariffs on Chinese goods, and this week, he imposed tariffs on imported steel and aluminium, a move that will affect Australia, one of the top iron ore producers.

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