Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.7250.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7250.
Add a stop-loss at 0.7050.
The AUD/USD pair continued its strong downward trend last week, reaching its lowest point since May 5. It dropped to 0.7150, much lower than the year-to-date high of 0.7278. This retreat may continue ahead of the upcoming Federal Reserve minutes and the Australian jobs report.
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The AUD/USD pair dropped sharply as the US dollar gains steam. The dollar index has jumped to $99.5, up sharply from this month’s low of $97.63.
This dollar rally may continue in the foreseeable future now that US inflation has continued rising. The most recent report revealed that the headline Consumer Price Index jumped to 3.8%. Also, the Producer Price Index has risen at the fastest pace in four years.
US inflation will likely continue rising in the coming months as the national average for gasoline prices jumped to $4.517. It has almost doubled from its lowest level this year, and the situation may worsen as the quagmire between the US and Iran continues. Donald Trump recently hinted that he may restart the war to push Iran to the negotiating table.
The next important AUD/USD pair will be the upcoming Federal Reserve minutes. These minutes will give a prediction on what to expect from the bank later this year. Most analysts believe that the bank will not cut interest rates this year.
The AUD/USD pair will next react to the upcoming Reserve Bank of Australian (RBA) minutes of the last meeting. These minutes will provide more information about the last meeting in which officials delivered the third interest rate hike of the year.
The Australian dollar will also react to the upcoming jobs report on Thursday. Economists expect the data to reveal that the economy created 17.5k jobs in April from the previous month’s 17.9k. The unemployment rate is expected to remain at 4.3%.
AUD/USD Technical Analysis
The daily chart reveals that the AUD/USD pair pulled back sharply in the past few days. It has remained below the ascending trendline that connects the highest swing since January 29 this year.
The pair also formed a small double-top pattern at 0.7278. A double-top is one of the most common bearish reversal signs in technical analysis. It has also moved below the 25-day Exponential Moving Average (EMA).
Therefore, the pair will likely continue falling in the near term. If this happens, the pair will likely drop to the next key support at 0.7050.