Evening Star Forms Ahead of RBA

There is a likelihood that the pair will retreat and retest the lower side of the channel at 0.7175.

Bearish View

  • Sell the AUD/USD pair and set a take-profit at 0.7150.
  • Add a stop-loss at 0.7245.
  • Timeline: 1 day.

Bullish View

  • Set a buy-stop at 0.7235 and a take-profit at 0.7300.
  • Add a stop-loss at 0.7160.

The AUD/USD pair has pulled back in the past few days as the US dollar crawls back and as investors wait for the upcoming interest rate decision by the Reserve Bank of Australia (RBA). The pair also retreated slightly after the mild jobs numbers from the United States.


RBA Interest Rate Decision

The AUD/USD has pulled back slightly as investors wait for the upcoming interest rate decision by the RBA. Analysts believe that the bank will continue hiking the hiking cycle that it started in May this year when it hiked by 0.25%.

The base case is that the RBA will hike interest rates by 0.25% and push the base lending rate to 0.60%. The most important catalyst for the pair will be the bank’s statement on the number of rate hikes that it will make later this year. Most analysts expect that it will signal that it will have a few more hikes in a bid to fight inflation.

The RBA meeting comes at an important time for the global economy. Last week, Jamie Dimon of JP Morgan warned that the global economy faces a hurricane in the coming months. He cited the rising cost of energy and food prices. In the same week, Elon Musk of Tesla said that he felt super bad about the American economy. As such, he hinted that Tesla would slash its workforce by about 10%.

The AUD/USD pair also declined after the latest American jobs numbers. The data revealed that the country’s economy added over 390k jobs in May while the unemployment remained close to its record low. At the same time, wages held quite well.

In addition to the RBA decision, the next key data to watch will be the upcoming US inflation numbers. Analysts will be watching whether inflation is showing signs of topping.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair formed an evening star pattern last week. In price action analysis, this pattern is usually a bearish sign. The pattern happened when the pair rose to the highest level since the first week of May.

Now, the pair has moved slightly below the 61.8% Fibonacci Retracement level. The pair has also formed an ascending channel pattern that is shown in black. It remains slightly above the 25-day and 50-day moving averages. Therefore, there is a likelihood that the pair will retreat and retest the lower side of the channel at 0.7175.


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