The pair will likely keep rising as bulls target the key resistance point at 0.6930.

Bullish View

• Buy the AUD/USD pair and set a take-profit at 0.6930.
• Add a stop-loss at 0.6800.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 0.6830 and a take-profit at 0.6750.
• Add a stop-loss at 0.6930.

The AUD/USD pair moved sideways as focus remains on the falling commodity prices and the strong American jobs data. The pair is trading at 0.6852, which is slightly above this month’s low of 0.7760. This price is significantly lower than June’s high of 0.7288.

Hawkish Fed Priced In

The AUD/USD pair has been in a consolidation mode in the past few weeks as investors continue watching the actions by the Reserve Bank of Australia (RBA) and the Federal Reserve.

In its meeting this month, the RBA decided to hike interest rates by 0.50% after delivering a similar one in the previous month. The bank has now hiked rates by 125 basis points and pointed to further hikes later this year.

The Federal Reserve will have its meeting in the final week of the month. Minutes by the FOMC that were published last week revealed that the committee was inclined to deliver another 0.75% rate hike this month.

The case for another bigger hike was supported by the relatively strong economic data by the Bureau of Labor Statistics. The numbers revealed that the economy’s labor market is substantially stronger than what analysts were expecting.

The economy added over 372k jobs in June, which was better than what analysts were expecting. In the same period, wages rose by more than 5% while the unemployment rate remained unchanged at 3.6%.

Therefore, with the labor market strengthening and with inflation soaring, analysts expect that the bank will continue hiking rates this month.

The AUD/USD is also ranging as investors focus on the relationship between China and Australia. China is seriously considering removing sanctions it has placed on most Australian goods. In a meeting the Chinese and Australian foreign ministers said that they will work on rebuilding trade relations. Notably, they did not provide a timetable of how this will happen.

AUD/USD Forecast

The AUD/USD pair has been rangebound in the past few weeks. The pair has managed to move above the important resistance level at 0.6831, which was the lowest level in May. It is also attempting to move above the 50-day moving average and the standard pivot point. It is also slightly below the descending trendline shown in blue.

Therefore, the pair will likely keep rising as bulls target the key resistance point at 0.6930, which is along the first resistance of the standard pivot point.

The pair will likely keep falling as bears target the key support at 1.055.

Bearish View

• Sell the EUR/USD and set a take-profit at 1.0550.
• Add a stop-loss at 1.0725.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0680 and a take-profit at 1.0790.
• Add a stop-loss at 1.0600.

The EUR/USD pair retreated after the Federal Reserve prepares to start its quantitative tightening policy. It also declined as investors wait for the upcoming jobs numbers from the United States. It is trading at 1.0643, which is slightly below this week’s high of 1.0786.

Fed Prepares for QT

The EUR/USD made a strong pullback on Wednesday after the Fed made plans to start shrinking its $8.9 trillion balance sheet. The bank is expected to reduce its assets at a pace that is twice as fast as the last financial crisis. The current size of quantitative tightening is about $47.5 billion per month. It will then double to $95 billion in September.

The Fed hopes that a combination of balance sheet reduction and high-interest rates will slow the economy and inflation without causing a recession. It has hinted that it will hike interest rates by 0.50% in the next three meetings and then shift to 0.25%.

However, some analysts believe that the Fed could pause rate hikes in September as it reflects on the impact. Notably, many investors believe that inflation growth may have peaked in April.

The next key catalyst for the EUR/USD pair will be the upcoming US jobs numbers. On Wednesday, data by the Bureau of Labor Statistics showed that the number of job openings slowed in April. The country had about 11.4 million openings, down from the previous 11.85 million.

On Thursday, ADP will publish its estimates for private payroll data. Economists expect the data to show that the private sector added 300k jobs in May from the previous 247k. The BLS will also publish the closely watched initial jobless claims.

And on Friday, the BLS will release the non-farm payroll data. The expectation is that the unemployment rate declined in May while wage growth continued.

EUR/USD Forecast

The four-hour chart shows that the EUR/USD pair declined to a low of 1.0627 in the overnight session. This was the lowest it has been since May 23rd. Also, the price was slightly below the 38.2% Fibonacci retracement level. At the same time, it has moved below the 50-period moving average while the MACD has crossed the neutral point.

Therefore, it seems like the recent rally may have peaked. As such, the pair will likely keep falling as bears target the key support at 1.055.

The pair will likely keep rising as investors target the 50% retracement level at 1.0765.

Bullish View

• Buy the EUR/USD pair and set a take-profit at 1.0800.
• Add a stop-loss at 1.0600.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.0600 and a take-profit at 1.0500.
• Add a stop-loss at 1.0700.

The EUR/USD price continued its bullish momentum after the hawkish note by Christine Lagarde. It also rose as volatility in the market declined, dragging the US dollar. It is trading at 1.0680, which is the highest it has been since April 26th.

ECB Tightening

The ECB has been embraced a more cautious tone than other major central banks. While the Fed, RBA, and BOE have all hiked interest rates, the ECB has failed to do so. Instead, the officials have focused on lowering the pace of easing in the past few meetings. As a result, this posture has dragged the EUR/USD close to its parity level against the US dollar.

The situation is now changing, if recent statements by ECB’s officials are to go by. Last week, the head of the German central bank recommended that the bank should start moving in its July meeting. In a separate statement, the head of the Dutch central bank said that the bank should deliver a giant 0.50% hike in a bid to fight inflation.

On Monday, Christine Lagarde penned a lengthy statement explaining her thoughts on tightening. She noted that the bank would start hiking interest rates in July and exit negative rates territory in September. This explains why the EUR/USD pair has risen sharply in the past few days.

The pair will therefore react to a statement by Lagarde that will happen during the American session. In it, she will likely talk more about her thoughts on how rapidly the bank will move from the era of easy money.

Meanwhile, the EUR/USD pair will react to a statement by Jerome Powell. Like last week, the Fed chair will likely reiterate on the bank’s policies. The top economic data to watch will be new home sales and EU and US flash PMIs.

EUR/USD Forecast

The EUR/USD has staged a strong comeback in the past few days. During this time, the pair has managed to move above the important 38.2% Fibonacci retracement level. It has also jumped above the important resistance level at 1.0640, which was the highest level on May 5th. The pair has moved above the 25-day moving average while the Stochastic Oscillator has moved above the overbought level.

Therefore, the pair will likely keep rising as investors target the 50% retracement level at 1.0765. A drop below the support at 1.0600 will invalidate the bullish view.