The outlook of the pair is neutral at this stage.
Bearish View
- Sell the AUD/USD and set a take-profit at 0.7445.
- Add a stop-loss at 0.7540.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7520 and a take-profit at 0.7600.
- Add a stop-loss at 0.7450.
The AUD/USD pair moved sideways on Monday morning as investors refocused on the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The pair is trading at 0.7500, where it has been in the past few days. This price is about 7.7% above the year-to-date low.
RBA Decision Next
The Australian dollar has done well in the past few months, helped by the dramatic increas in commodity prices. Most commodity prices that Australia exports like natural gas, coal, and copper have all increased as the crisis escalates.
The currency has also done well as investors price in a more aggressive RBA. In the past meetings, the RBA has said that it will continue leaving interest rates unchanged at 0.10% until real inflation moves to between 2% to 3%.
Therefore, analysts expect that the bank will follow the steps of other major central banks that have also started to hike interest rates. The Bank of England (BOE) has made three rate hikes while the Fed has made its first 0.25% hike.
And many Fed officials are now supportive of more hikes even as signs of recession rose. Last week, the yield curve inverted for the first time in years. In a statement during the weekend, Mary Daly of San Francisco Fed said that she was supportive of a 0.50% rate hike in May.
Therefore, the next major catalyst of the AUD/USD will be the upcoming RBA decision that comes on Tuesday. There is a likelihood that the bank will change its tone during the meeting.
The pair was also unchanged after the latest Australian retail sales numbers. According to the Australian Bureau of Statistics (ABS), retail sales held steady in February even as inflation kept rising.
AUD/USD Forecast
The AUD/USD pair has been in a strong bullish trend in the past few months. Recently, however, this price action has faded and the pair has been in a tight range. As a result, the price is along the 25-day moving average and the middle line of the Donchian Channels. The Relative Strength Index (RSI) has moved to the neutral level.
Therefore, the outlook of the pair is neutral at this stage. However, there is a likelihood that it will have a minor bearish breakout and retest the support at 0.7442. On the flip side, a move above the support at 0.7537 will mean that there are more buyers.
