The AUD/USD pair formed strong support at 0.6696, which was its lowest point on February 27.
- Buy the AUD/USD pair and set a take-profit at 0.6900.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
- Set a sell-stop at 0.6735 and a take-profit at 0.6650.
- Add a stop-loss at 0.6850
The AUD/USD exchange rate bounced back above the key support level at 0.6696 ahead of the upcoming interest rate decision by the Relative Strength Index (RSI). It rose to a high of 0.7672, which was above this month’s low of 0.6696.
The Australian dollar drifted upwards slightly as the market reflected on China’s growth forecasts. During the weekend, the communist party said that it aimed to grow the economy by 5% this year as the country emerges from the Covid-zero strategy. The government aims to create over 12 million urban jobs and increase the population.
The AUD/USD pair’s next important catalyst will be the upcoming interest rate decision by the RBA. In its second interest rate decision of the year, analysts expect that the RBA will hike interest rates by 0.25% for the tenth straight meeting. The rate hike will be necessary considering that inflation remains sticky at a multi-decade high of 7.8%.
If this happens, the RBA will hike interest rates to 3.6%, the highest level in more than a decade. Analysts expect that the terminal rate will peak at 4.2%, meaning that the RBA will need to hike rates three more times. The pair will also react to a statement by Philip Lowe to the AFR Business Summit on Wednesday.
Meanwhile, the Federal Reserve’s actions are also on focus as bond yields continue rising. Bond yields have continued rising, with the ten-year rising to 4% for the first time in months. The 2-year note has remained at an elevated level.
Jerome Powell will testify before Congress this week, where he will deliver the semiannual monetary policy testimony. This statement will come ahead of the upcoming non-farm payrolls (NFP) data scheduled for Friday.
The AUD/USD pair formed strong support at 0.6696, which was its lowest point on February 27. It is a few points below the key resistance point at 0.6784, the neckline of the double-top pattern. The pair has moved slightly above the 25-period moving average.
At the same time, the histogram of the MACD has moved above the neutral point while the MACD and signal lines are rising. The RSI has moved above the neutral point at 50. Therefore, the pair will likely continue soaring as buyers target the key resistance point at 0.6900.