Trade of The Day – AUDUSD

Facts:

• The momentum of the moving averages supports further price appreciation. Particularly important is the EMA100 crossing above the EMA200 from below.
• A significant divergence is emerging between expected interest rates in Australia and the U.S. Futures contracts indicate that the market expects 2.4 rate cuts in the U.S. by March 2027, while for Australia expectations are 1.3 rate hikes over the same period.
• This divergence is likely to be supported by Australia’s CPI inflation and unemployment rate. CPI remains higher and unemployment lower than in the U.S.

Trade idea: Long position (BUY) on AUDUSD at market price

• Target: 0.7430
• Stop: 0.6750

AUDUSD (D1)

Source: xStation5

OPINION: The Reserve Bank of Australia was one of the first major central banks that recently had to decide on an interest-rate hike, mainly due to rising inflation. Given expectations of further rate cuts in the U.S., the exchange rate should favor continued upside. Technicals also support gains—the EMA structure closely resembles that seen in 2015 and 2020. However, the “wild card” for AUD could be demand for commodities and the latest U.S. PCE inflation reading, which may alter the expected path of U.S. rate cuts.

Methodology and assumptions:

• The recommendation is based on technical analysis of the chart, particularly EMA moving averages and Fibonacci levels, as well as analysis of the monetary policy outlook for Australia and the U.S.
• The target level was determined using Fibonacci levels.
• The protective stop-loss order was set based on a favorable risk-to-reward ratio and also anchored to a Fibonacci level.