The pair will likely keep rising as bulls target the next key resistance level at 0.7100.
Buy the AUD/USD pair and set a take-profit at 0.7100.Add a stop-loss at 0.6950.Timeline: 1-2 days.
Set a sell-stop at 0.6950 and a take-profit at 0.6850.Add a stop-loss at 0.7025.
The AUD/USD pair held steady on Monday morning as the market waited for the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The Australian dollar is trading at 0.6990, which is significantly above last month’s low of 0.6685.
RBA Rate Decision Preview
The RBA started its two-day meeting on Monday morning as it continues to battle rising inflation. It will deliver its decision on Tuesday. Analysts believe that the bank will deliver another interest rate hike.
Precisely, the base case is that the bank will hike interest rates by another 0.50% and bring the main lending rate from 1.35% to 1.85%. If this happens, it means that the bank will have implemented rate hikes by 135 basis points this year.
The RBA has made a sharp turnaround considering that it was relatively dovish in 2021. At the time, its officials were hinting that the bank will hike rates for the first time in 2023 or 2024.
The bank meets at a mixed time for the Australian economy. Data published last week showed that Australia’s inflation surged by 6.1% in the first quarter of the year. That was the biggest increase in over 21 years. The Australian Bureau of Statistics (ABS) blamed the surge in inflation to the soaring food and energy prices. The RBA has said that inflation could hit 8% this year.
Meanwhile, the AUD/USD is rising even after signs emerge that Australia’s housing sector is seeing challenges as mortgage rates soar. Recent data shows that home prices in Sydney and Melbourne have declined at the fastest pace in years.
The pair will also react to the weakening US dollar. The dollar index has dropped sharply in the past few days as investors price in for a dovish Fed in the coming months.
The four-hour chart shows that the AUD/USD pair has been in a bullish trend in the past few days. The pair has moved to the 50% Fibonacci Retracement level. It has also moved above the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved above the neutral point at 50.
Therefore, the pair will likely keep rising as bulls target the next key resistance level at 0.7100. A drop below the support at 0.6900 will invalidate the bullish view.
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