Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6520.
- Add a stop-loss at 0.6300.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6365 and a take-profit at 0.6250.
- Add a stop-loss at 0.6450.
The AUD/USD price pulled back slightly as traders focused on the upcoming interest rate decision by the Reserve Bank of Australia (RBA) and the Fed. It dropped to a low of 0.6400, which was lower than last month’s high of 0.6520.
RBA rate decision
The main catalyst for the AUD/USD price will be the upcoming interest rate decision by the Reserve Bank of Australia. Economists expect that the bank will deliver the second straight 0.25% rate hike as it continues fighting the soaring inflation.
However, some analysts believe that the bank could surprise with a 0.50% hike after last month’s surprising inflation figure. Data published by the bureau of statistics showed that headline consumer inflation rose to 7.3% in September, the highest level since 1990.
This inflation was driven by relatively higher oil and gas prices. Trimmed CPI, which excludes the volatile food and energy prices rose to 6.1% in Q3 from 4.9% in the previous quarter.
The CPI data came two days after the Australian government published the latest federal budget. In a statement, the treasurer estimated that the headline inflation will rise to 7.75% in the fourth quarter. A 0.25% rate hike will not have a major impact on the Australian dollar.
The AUD/USD price will also react to the latest decision by the Federal Reserve scheduled for Wednesday this week. Economists believe that the Fed will continue hiking rates in its meeting. Precisely, the bank is expected to hike by another 0.75%.
The Fed has already hiked rates by 300 basis points this year and started a quantitative tightening (QT) process in a bid to reduce its expansive balance sheet. Traders will assess its statement for any signs of a Fed pivot.
AUD/USD forecast
The AUD/USD price rose to a high of 0.6520 last week. This was an important level since it was along the second resistance of the standard pivot point. It was also slightly above the ascending channel shown in blue.
The Aussie remains slightly above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has tilted downwards. The MACD and the Stochastic Oscillator are still trending upwards. Therefore, the pair will likely resume the bullish trend and retest last week’s high at 0.6520.
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