AUD/USD Signal Today – 02/05: Inverse H&S Pattern (Chart)

Bullish view

  • Buy the AUD/USD pair and set a take-profit at 0.6600.
  • Set a stop-loss at 0.6450.
  • Timeline: 1-2 days.

Bearish view

  • Set a sell-stop at 0.6480 and a take-profit at 0.6400.
  • Add a stop-loss at 0.6600.

AUD/USD Signal Today - 02/05: Inverse H&S Pattern (Chart)

The Australian dollar rebounded after the relatively dovish Federal Reserve interest rate decision. The AUD/USD pair surged to a high of 0.6540, which was over 1.15% above its lowest point this week.

US dollar index eases

The US dollar index retreated sharply after the Federal Reserve interest rate decision. In it, the bank decided to leave interest rates unchanged between 5.25% and 5.50%. It cited that inflation was still stubbornly high in the country.

Data released last month showed that the Consumer Price Index (CPI) rose to 3.5% in March while the Personal Consumption Expenditure (PCE) jumped to 2.5%. These numbers mean that inflation is taking longer than expected to move to the Fed’s 2% target.

The Fed also noted that it will start reducing the pace of quantitative tightening in June. It has been reducing its balance sheet since 2023, a move that has reduced its assets from almost $7.4 trillion. It will now trim the QT program to about $25 billion from the current $60 billion.

In his statement, Jerome Powell noted that the economy was still doing well, helped by robust consumer spending. That spending has been offset by a retreat in corporate spending in the country.

Most notably, the Federal Reserve announced that it will not hike interest rates this year since it believes that the current policy is highly restrictive.

The reaction to the Fed policy was swift as the US dollar index plunged. Government bond yields tumbled, with the ten-year fell to 4.62% while the 30-year dropped to 4.7%. American stocks bounced back, with the Dow Jones index rising by over 200 points.

Looking ahead, the next AUD/USD news to watch will be the US nonfarm payrolls (NFP) data. Economists expect the data to reveal that the economy added over 200k jobs in April as the unemployment rate remained at 3.8%.

AUD/USD technical analysis

The AUD/USD exchange rate bounced back after the Federal Reserve decision. It crossed the important resistance level at 0.6482, its lowest swing on April 24th and March 4th. The pair is hovering at the 50-period moving average.

Meanwhile, the Awesome Oscillator indicator has remained below the neutral point. The Relative Strength Index (RSI) has pointed upwards. Also, it has formed an inverse head and shoulders pattern, a popular bullish sign.

Therefore, the pair will likely continue rising ahead of the US jobs numbers. If this happens, the key point to watch will be at 0.6600.

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