Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6350.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate pulled back on Monday morning, a day after US trade negotiators concluded their first talks. It also retreated ahead of the closely watched US inflation, retail sales numbers, and the upcoming Australian jobs report.
Key US and Australia data ahead
The AUD/USD pair was little changed after US and Chinese officials gathered in Switzerland for trade talks. China hopes that the US to reduce its tariffs, a move that will help it continue selling goods worth billions of dollars.
Still, analysts, including Scott Bessent, the US Treasury Secretary, expect that the final agreement will take a while longer to complete. Nonetheless, analysts have welcomed these talks, which they hope will help to reduce tariffs in the long run.
Australia will likely benefit from a positive outcome of US-China trade talks because of its close trade relationship with China, which buys most of its goods and services.
The AUD/USD pair will have more catalysts this week, with the most important one being the upcoming US inflation data scheduled on Wednesday. Economists expect the data to show that US consumer prices rose slightly in April because of Trump’s tariffs.
Consumer inflation expectations remain significantly high. For example, Goldman Sachs analysts believe that the underlying inflation will rise to 3.8% at the end of the year and then drop to 2.7% at the end of 2026.
These inflation expectations explain why the Federal Reserve is not in a hurry to cut interest rates. In last week’s meeting, the bank’s officials hinted that they will maintain a wait-and-see approach before cutting rates.
The US will also publish the latest retail sales, manufacturing and industrial production numbers this week. The other key AUD/USD news will come from Australia, which will release the latest jobs numbers on Thursday.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair pulled back last week and briefly moved below the psychological point at 0.6400. It also dropped slightly below the 50% Fibonacci Retracement level at 0.6425.
On the positive side, it has remained above the 50-day moving average and formed a megaphone chart pattern. This pattern is made up of two ascending and diverging trendlines. In most cases, it normally leads to a strong bullish breakout, which starts when it moves to its lower side.
If this happens, the pair will likely rebound and retest the psychological point at 0.6500. A move below the lower side of the wedge will invalidate the bullish outlook.
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