The AUD/USD pair pulled back as Jerome Powell, the Federal Reserve chairman, testified in Congress.
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- Buy the AUD/USD pair and set a take-profit at 0.6900.
- Add a stop-loss at 0.6740.
- Timeline: 1-2 days.
- Set a sell-stop at 0.6775 and a take-profit at 0.6700.
- Add a stop-loss at 0.6900.
The AUD/USD pair dropped to its lowest level since June 13th and then quickly rebounded to a high of 0.6800. The pair remains about 1.45% below the highest level this year. In all, the pair has jumped by more than 5% from the lowest point in May.
The AUD/USD pair pulled back as Jerome Powell, the Federal Reserve chairman, testified in Congress. In his testimony, Powell hinted that the Fed will continue hiking interest rates this year, noting that the battle against inflation was still raging on.
The testimony came a week after the Fed decided to leave interest rates unchanged between 5% and 5.25%. It was the first time in ten meetings that the Fed decided to leave rates intact. The accompanying statement and the dot plot hinted that the bank will hike rates by another 0.50% this year.
There will be no economic data from Australia on Thursday. Therefore, the key catalyst for the AUD/USD pair will be the second day of testimony by Jerome Powell. Historically, the second day of testimony does not always lead to significant volatility.
The pair will also react to the latest existing home sales numbers from the US. Economists expect the data to show that existing home sales dropped from 4.28 million in April to 4.25 million in May. These numbers will come two days after the US published strong building permits and housing starts data. Therefore, there are signs that the housing sector is recovering well after falling earlier this year.
The other important economic events are last week’s initial and continuing jobless claims numbers. Initial jobless claims have held quite well in the past few weeks, showing that the labor market is still strong.
The AUD/USD pair bounced back after falling to a low of 0.6741 on Wednesday. On the 4H chart, the pair moved above the Ichimoku cloud. It is also about to move above the 25-period and 50-period moving averages.
The pair is a few points below the crucial resistance point at 0.6815. This was an important level since it was the upper side of the cup and handle pattern. Therefore, a move above 0.6815 will signal that there are more buyers in the market. If it happens, the next level to watch will be at 0.6900.
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