Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6590.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6630 and a take-profit at 0.6700.
- Add a stop-loss at 0.6550.
The AUD/USD pair rose slightly after a report showed that hedge funds were trimming their short positions on the Aussie. It rose to 0.6630 on Monday morning, up from last week’s low of 0.6593 ahead of a relatively muted day.
A report by the Commodity Futures Trading Commission (CFTC) revealed that hedge funds were scaling back their Aussie short bets. The CoT report showed that the short positioning improved to minus 56.2k last week from 77.2k a week earlier. It was the lowest figure since January this year.
This positioning came as the Reserve Bank of Australia (RBA) minutes showed that officials considered hiking interest rates in the last meeting. As a result, this figure was interpreted to mean that officials expect the bank to maintain rates higher for longer.
The Fed minutes also signaled that officials were still concerned about the stubbornly high inflation figure. Like the RBA, there are signs that the Fed will hold rates at a higher level for longer than expected. In a statement last week, David Solomon, the CEO of Goldman Sachs noted that the Fed may not cut rates this year after all.
The next important economic numbers to watch this weel will be the US PCE inflation report. This is an important inflation figure that the Fed pays a close attention to because it captures the urban and rural products. A higher-than-expected figure will point to higher rates for longer and vice versa.
In Australia, the key figures to watch will be the latest retail sales and the monthly CPI indicator report. Economists expect the inflation figure to come in at 3.4%, much higher than the Fed’s target of 2.0%.
AUD/USD technical analysis
The AUD/USD exchange rate formed a double-top pattern at 0.6708. It then dropped below its neckline at 0.6650 last week and the support at 0.6643 (April and May 1st highs). The pair also fell below the 50-period moving average while the two lines and the histogram of the MACD have moved below the neutral point.
It has also moved between the first and second support levels of the Andrew’s pitchfork tool. Therefore, the pair will likely remain in this range on Monday because American markets will be closed for the Memorial Day holiday.
The UK, another key country in the forex market, will have a bank holiday. Therefore, the key support and resistance levels to watch will be at 0.6595 and 0.6660.
Ready to trade our free trading signals? We’ve made a list of the top forex brokers in Australia for you to check out.