AUD/USD trading idea on July 5, 2024
AUD/USD showed steady growth during the Friday trading session, maintaining the "bullish" momentum that originated at the beginning of the week. The pair is currently trading around 0.6730, updating local highs that have not been seen since January 2024.
The Australian dollar is supported by the divergence in monetary policy of the US Federal Reserve System (Fed) and the Reserve Bank of Australia (RBA). The market expects the Fed to start cutting interest rates at its September meeting. According to CME FedWatch, the probability of such a scenario increased from 60% to 72.6% last week. In addition, two Fed rate cuts are possible this year, but the real decisions will depend on macroeconomic data, which is disappointing so far. In particular, the American economy slowed down in the second quarter due to a decrease in activity in the service sector. In particular, the PMI index for the US services sector fell to 48.8, which is lower than expectations of 52.5 and the previous value of 53.8.
While the Fed is preparing to cut rates, the RBA, on the contrary, may tighten monetary policy if inflation continues to rise. In May, retail sales increased by 0.6%, which is significantly higher than forecasts. The probability of a rate hike at the next RBA meeting, which will be held on August 6, is 25%, and increases to 50% at subsequent meetings.
Taking into account all the above, the readings of technical indicators and graphical patterns, we believe that AUD/USD has the potential for further growth above the 0.6800 level.
Trading recommendations
- Buy Stop: 0.6750
- Take Profit (TP): 0.6850
- Stop Loss (SL): 0.6720