Bearish View
- Sell the AUD/USD and add a take-profit at 0.7500.
- Add a stop-loss at 0.7650.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7600 and a take-profit at 0.7700.
- Add a stop-loss at 0.7550.
The AUD/USD pair declined in early trading as investors reacted to the latest lockdowns announced in Australia to curb the spread of the new Delta variant. The pair fell to 0.7583, which was slightly below last week’s high of 0.7615.
Australian Delta Variant
The Australian government announced more lockdowns in Sydney and Melbourne as the number of new coronavirus cases. Sydney will go into a two-week lockdown as health officials try to do contact tracing for the delta variant.
Residents in the city will only be allowed to leave their homes for essential work, receive vaccines and seek medical care. Other activities like exercises will be limited. In addition to Sydney, about 75% of New South Wales residents have been in lockdown.
The new lockdowns risk slowing down the economy that has been recovering at a relatively faster rate. This, in turn, will likely see the Reserve Bank of Australia (RBA) maintain its dovish tone when it meets next week.
The AUD/USD is also reacting to the relatively strong industrial profit data from China. The numbers showed that the profits increased by 36.40% year-on-year in May after rising by 57% in April. The profits have also surged by more than 83.4% year-to-date as global demand rises. These numbers are important since Australia sells most of its goods to China.
The pair will likely be muted today since there are no major economic numbers scheduled in Australia and the US. The first major data will come out on Tuesday when the Conference Board will publish the latest consumer confidence data.
The AUD/USD is also reacting to the relatively strong US inflation data. On Friday, data showed that the PCE price index rose by 0.4% in May, the third straight big increase. The PCE rose by 3.9% year on year, the biggest increase since 2008.
AUD/USD Technical Analysis
The hourly chart shows that the AUD/USD pair has been under pressure in the past few sessions. It has dropped from 0.7615 to 0.7580. On the hourly chart, the pair has formed an ascending channel that is shown in blue. It has also moved slightly below the 25-day and 15-day moving averages. The pair has also formed a small head and shoulders pattern. Therefore, the pair will likely break out lower as bears target the first support of the standard pivot point at 0.7500. However, a move above 0.7650 will invalidate this trend.
