The sharp decline will likely take a break in the next few days.
- Buy AUD/USD and set take-profit at 0.7495.
- Add a stop-loss at 0.7390.
- Lead time: 1-2 days.
- Set a sell stop at 0.7400 and a take profit at 0.7300.
- Add a stop-loss at 0.7500.
AUD/USD tried to rally after surprise interest rate decisions from the Reserve Bank of New Zealand (RBNZ) and the Bank of Canada (BOC). The pair is trading at 0.7440, a few points above this week’s low at 0.7395.
More pressure on the RBA
This month, the Reserve Bank of Australia hinted that it would start raising interest rates in June this year. In the statement, the bank hinted that it was starting to lose patience with its inflation target.
The bank could now come under pressure from other central banks. For example, the Fed has started raising interest rates and hinted that it will become more aggressive in the coming months. Analysts expect the bank to make about 6 more hikes this year.
On Wednesday, the RBNZ surprised many analysts with a bigger than expected rise. It pushed its benchmark interest rate to 1.50% from 1.0% in its biggest rate hike in 22 years.
The BOC also decided to raise interest rates by another 0.50%. Similarly, the BOE has already made three rate hikes since last December. Therefore, analysts believe that the RBA will also become more aggressive in the coming months.
The AUD/USD pair is also reacting to the latest employment figures. According to the Statistics Agency, the country’s unemployment rate remained at 4.0% in March. This performance is below the median estimate of 3.9%. The economy added 17,900 jobs in March after adding another 77,000 jobs the previous month.
The pair will then react to the latest retail sales and export and import price index data from the United States.
AUD/USD fell to lows of 0.7400 this week. Closer examination shows that it has formed a small double bottom pattern at this level. On the four-hour chart, the pair is trading high as it hit its all-time high on March 7th. It is also slightly below the 25 and 50 day moving averages, while the MACD has formed a bullish cross pattern.
So, the sharp decline will likely take a break in the coming days. If this happens, the next key resistance will be at 0.7495.