Bearish signal
- Set a sell-stop at 0.7695 (slightly below the support at 0.7700).
- Add a take-profit at 0.7600 and a stop-loss at 0.7750.
- Timeline: 1-2 days.
Bullish signal
- Set a buy stop at 1.7750 and a take-profit at 1.7800.
- Add a stop loss at 0.7700.
The AUD/USD pair retreated in the Australian session as investors focused on the falling commodity prices and the positive statement by Jerome Powell. It is trading at 0.7713, which is 1.75% below last Thursday’s high of 0.7850.
Commodity prices struggle
The Australian dollar is one of the leading commodity currencies in the world thanks to the country’s vast natural resources and its close trading relationship with China. The country has vast resources like coal, iron ore, copper, lead, nickel, and zinc, among others. Therefore, Aussie is often seen as a proxy for these commodities.
Most commodities have declined today as investors start to worry about global demand. The price of copper has fallen by more than 1% while that of gold, platinum, and nickel has declined by more than 0.50%.
In general, analysts are concerned about whether the recent demand will continue to support the prices. Also, there are concerns that suppliers will increase their production to take advantage of higher prices.
The AUD/USD is also falling as the US and Australian bond yields retreat. In the US, 10-year government yield has dropped to 1.66%, which is substantially below last Friday’s high of 1.74%. In Australia, the yield on the ten-year has dropped to 1.745% as inflation fears ease.
Later today, the AUD/USD will react to the latest US new home sales numbers that will come out in the American session. Like the existing home sales numbers published yesterday, analysts expect these numbers to show that new home sales retreated in February because of the lockdowns.
The pair will also react to the Fed Chair and other FOMC members’ testimony in Congress. They will likely be asked about their last week’s decision and what they plan to do going forward. In a speech yesterday, Jerome Powell said that the US was still going through an uneven economic recovery.
AUD/USD technical analysis
The AUD/USD has been under pressure lately. It has dropped by about 1.75% from its highest point on Thursday and moved below the 25-day and 15-day exponential moving averages (EMA). It has also declined below 61.8% Fibonacci retracement level while the Relative Strength Index (RSI) has moved close to the oversold level.
Also, it is slightly above the important support at 0.7700. Therefore, the pair may continue dropping as bears target the next key support at 0.7650, which is the lowest level since March 9.
