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Aussie Rebound to be Short-Lived

Recent numbers are supportive of a rate hike by the Federal Reserve. 

  • Sell the AUD/USD pair and set a take-profit at 0.6500.
  • Add a stop-loss at 0.6570.
  • Timeline: 1-2 days.
  • Set a buy-stop at 0.6555 and a take-profit at 0.6625.
  • Add a stop-loss at 0.6500.

The Australian dollar drifted upwards as investors bought the dip. The AUD/USD pair rose to a high of 0.6555, higher than last Friday’s low of 0.6490. Still, the Aussie has dropped by over 4% from the highest point this month.

Congressional leaders spent the Memorial holiday weekend lobbying their members to pass the debt ceiling deal reached over the weekend. The expectation is that the bill will be passed by both Democrats and Republicans in the House and then in the Senate later this week.

By lifting the debt ceiling by two years, it means that the biggest risk facing the financial market has been eliminated. At the same time, there are signs that the risks in the banking sector have eased recently while inflation remains high.

Therefore, these are all catalysts for a potential rate increase by the Federal Reserve in the coming meetings. In its meeting in May, the bank decided to hike interest rates by 0.25% and signaled that it will be data-dependent.

Recent numbers are supportive of a rate hike by the Federal Reserve. On Friday, numbers showed that the country’s personal consumption expenditure remained above the 2% target of the Federal Reserve. This was an important figure since it is what the Fed pays close attention to when making decisions.

The AUD/USD will react to the upcoming US consumer confidence data. Economists believe that the country’s consumer confidence eased slightly in May as inflation continued rising. They expect it to move below 100 for the first time since July last year.

The US will also publish the latest house price data, which are expected to show that prices rose slightly in March. Home prices have held quite well as the number of new inventories rise slowly.

The AUD to USD pair drifted upwards slightly as investors bought the dip in a low-volume environment. It rose to a high of 0.6554, the highest point since May 24th. The pair remains below the 50-period exponential moving average. And as expected, the Relative Strength Index (RSI) and the MACD drifted upwards.

It has also formed a small shooting star pattern. The pair will likely resume the bearish trend as sellers attempt to retest this month’s low of 0.6490. This view will become invalid if it moves above the key resistance point at 0.6566.


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