Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6700.
Add a stop-loss at 0.7050.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.6700.
The AUD/USD pair continued its strong downward trend in the past few weeks, moving from a high of 0.7276, its highest point on May 13. It has retreated to a low of 0.6900, its lowest point on April 3.
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Australian Dollar Drops as RBA Rate Cut Odds Fall
The AUD/USD pair has been in a strong downward trend as the US Dollar Index continued soaring. The index, which tracks the dollar against the top global currencies, has soared to its highest point in months.
It has jumped against most developed and emerging market currencies after the Federal Reserve interest rate decision last week. In it, the bank decided to leave interest rates unchanged between 3.50% and 3.75%, with the dot plot pointing to a rate hike later this year.
The AUD/USD pair also dropped sharply after Australia published a weaker-than-expected consumer inflation report. A report by the Australian Bureau of Statistics (ABS) showed that the headline CPI dropped to 4.0% from the previous 4.30%.
While the inflation rate was lower than expected, it was much higher than the bank’s target of between 2% and 3%. In its rate decision last week, Michele Bullock noted that the bank will be ready to hike interest rates if inflation continues rising.
The AUD/USD pair also retreated after the Australian Bureau of Statistics released the latest jobs numbers. This report showed that the unemployment rate improved to 4.4% as the economy added jobs after shedding over 18.6k in the previous month.
The next important data to watch will be from the United States, where the statistics agency publishes the latest US PCE and GDP report. Economists expect the data to show that the core PCE rose 3.4% in May, while the headline PCE moved to 3.8%, higher than the Fed’s 2% target.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a strong downward trend this month. It has slumped from a high of 0.7276 in May to 0.6900, its lowest level since April 6.
The pair has dropped below the 23.6% Fibonacci Retracement level. Also, it has dropped below the 50-day moving average, while the Relative Strength Index (RSI) has moved to the lowest level since April last year.
Therefore, the pair will likely continue falling, potentially to the 38.2% Fibonacci Retracement level of 0.6758.
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