Anticipating further rise with bullish break and retest pattern. Buy strategy targets 0.6600, stop-loss at 0.6500, amid key economic data.

Bullish view

• Buy the AUD/USD pair and set a take-profit at 0.6600.
• Add a stop-loss at 0.6500.
• Timeline: 1-2 days.

Bearish view

• Set a buy-stop at 0.6550 and a take-profit at 0.6625.
• Add a stop-loss at 0.6450.

(Click on image to enlarge)

The AUD/USD pair was flat on Thursday as some analysts made the case for the Australian dollar. It was trading at 0.6545, a few points below this week’s high of 0.6580 as focus shifts to the upcoming US PMIs and existing home sales data.

UBS is bullish on Aussie

The AUD/USD pair remained in a tight range as analysts at UBS predicted that it could jump to 0.72, which is about 10% above the current level. These analysts cited the fact that the RBA will likely hold rates higher than the Fed.

Minutes published on Tuesday revealed that the RBA considered hiking rates by 0.25% in a bid to push inflation downwards. The most recent data showed that the headline Consumer Price Index (CPI) rose by 4.1% in the fourth quarter.

Meanwhile, data by the country’s statistics agency showed that wages continued rising in January. Wage growth rose by 4.2%, higher than inflation. This means that inflation will take longer before it settles to the bank’s target of 2.0%. The RBA estimates that inflation will drop to 2% in either 2024 or 2025.

The AUD/USD pair also reacted to the latest Federal Reserve minutes. These minutes showed that Fed officials were concerned about cutting rates too soon since inflation is still higher than its target of 2.0%.

The next AUD/USD news to watch will be the upcoming US initial and continuing jobless claims numbers. Expectations are that initial jobless claims rose to 218k last week. These numbers will be followed by the latest existing home sales. Existing home sales are expected to come in at 3.96 million in January.

The other important data will be the flash manufacturing and services PMI numbers by S&P Global. The report is expected to show that business output rebounded in February.

AUD/USD technical analysis

The AUD/USD pair has been in a slow bullish trend after bottoming at 0.6442 last week. It jumped to a high of 0.6580 on Wednesday. It has now retested the important support at 0.6543, which is the neckline of the inverse head and shoulders pattern. This support is also the 23.6% Fibonacci Retracement point.

In most cases, a break and retest pattern is one of the most popular continuation patterns. Therefore, the outlook for the pair is bullish, with the next target to watch being the 38.2% retracement point at 0.6600.

More By This Author: