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The pair will likely resume the bullish trend as buyers attempt to test the 50% retracement level at 0.6988.
Bullish View
- Set a buy-stop at 0.6910 and a take-profit at 0.700.
- Add a stop-loss at 0.6825.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.6853 and a take-profit at 0.6800.
- Add a stop-loss at 0.6925.
The AUD/USD currency pair retreated slightly after the Australian government launched a review of the RBA. It dropped to a low of 0.6880, which was slightly below this week’s high of 0.6931. This price is about 2.96% above this month’s low of 0.6685.
RBA Inflation Target
The AUD/USD pair declined slightly after Australia’s treasurer, Jim Chalmers unveiled a review for the RBA. The review will focus on how the RBA missed inflation in 2021. At the time, the bank guided that it would start hiking interest rates in either 2023 or 2024.
The bank was forced to start hiking interest rates in May of this year. That was 7 months after the Reserve Bank of New Zealand delivered its rate hike. It has now hiked interest rates by 135 basis points and hinted that it will continue hiking in the remaining meetings of the year.
Recent data showed that inflation has been in a strong upward trend. It rose to 5.1% in the first quarter, the highest it has been since 1991. While this rate is smaller than in most countries, it is significantly above the RBA flexible target of between 2% and 3%.
Therefore, analysts expect that the RBA will hike interest rates in the remaining meetings. In a statement, analysts at ANZ said that they expect four 0.5% back-to-back rate hikes. This will take interest rates to 3.35% by the end of the year.
The AUD/USD pair also declined slightly after the latest US housing data. According to the National Association of Realtors, the median existing home price surged to $416k in June. That was a 13.4% increase from the same period in 2021. This happened even after existing home sales declined by 5.4% in June.
Data published earlier this week showed that building permits and housing starts declined sharply in June as interest rates rose. The US will publish the latest initial jobless claims and manufacturing index data.
AUD/USD Forecast
The AUD/USD pair rose to a high of 0.6930 on Wednesday. This was a notable level since it was slightly above the 38.2% Fibonacci Retracement level. It then retreated slightly and is slightly above the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has moved slightly below the overbought level.
The pair will likely resume the bullish trend as buyers attempt to test the 50% retracement level at 0.6988. A drop below the 23.6% retracement level at 0.6830 will invalidate the bullish view.
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