The pair will likely keep rising as investors target the next psychological level at 0.7100.
Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7100.
- Add a stop-loss at 0.6900.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.6950 and a take-profit at 0.6900.
- Add a stop-loss at 0.700.
The AUD/USD pair rose to the highest level since June 17th after the Federal Reserve delivered another 0.75% rate hike on Tuesday. The pair has now risen by over 4.7% from its lowest point this month as investors bet that the US dollar index rebound may have peaked.
Federal Reserve Rate Hike
The Federal Reserve continued its extremely hawkish policy on Wednesday as the committee continued to intervene in a bid to reduce inflation. The bank hiked rates by 0.75% for the second time this year. This hike brought the benchmark interest rate to 2.50%, which was the highest point in years.
Bond yields diverged after the rate hike. Yields of the 10-year bond yields dropped to 2.77% while the 30-year rose to 3.03%. In Australia, the country’s 10-year bond yields declined by 2.40% in the overnight session.
In a statement, the bank said that the country was heading in the right direction. Recent data showed that the country’s unemployment rate remained at 3.7%. However, it warned that inflation remained at an elevated level. The statement said:
“The Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”
Therefore, the spread between Australia’s and US interest rates is still wide. The Reserve Bank of Australia (RBA) hiked interest rates to 1.35%. It will also continue hiking considering that the country’s inflation surged to 6.1%.
Meanwhile, data published on Wednesday showed that new home sales in the US declined while the trade surplus remained close to $100 billion in June. The next key catalyst for the AUD/USD pair will be the upcoming US GDP data. Analysts expect the data to reveal that the economy expanded by 1.5% in the second quarter.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bullish trend in the past few days. The pair managed to move above the important resistance level at 0.6981, which was the highest point this month. It also rose above the 25-day and 50-day moving averages while the Relative Strength Index crossed the descending trendline.
The pair also rose slightly above the 50% Fibonacci retracement level. Therefore the pair will likely keep rising as investors target the next psychological level at 0.7100.
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