Bearish View
Sell the AUD/USD and set the take-profit at 0.7250.
Add a stop-loss at 0.7400.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7350 and a take-profit at 0.7450.
Add a stop-loss at 0.7300.
The AUD/USD pair tilted lower as the number of COVID cases in Australia kept rising and as US Senate moved closer to passing the $1 trillion infrastructure bill. The pair declined to 0.7320, which was slightly below last Friday’s high of 0.7425.
Australian Dollar Pressured
The key mover for the AUD/USD pair is the rising number of COVID cases in Australia. New South Wales confirmed a record 356 new cases even as the government ramped up the vaccination drive. Victoria reported 20 cases. Meanwhile, China has also recorded more cases recently, putting the recovery at risk. China is the most important trade partner for Australia considering that it buys most of its goods and services.
Meanwhile, data published today shows the impact of the country’s new COVID crisis. According to NAB Bank, the country’s business survey declined sharply in July. It retreated from 24 to 11 as businesses remanded concerned about the new crisis. At the same time, the business confidence figure declined from 11 to -8.
The AUD/USD pair also declined because of the performance of key commodities. On Monday, most commodities had a flash crash, with crude oil tanking by more than 5%. Copper, gold, and silver also retreated. This decline was blamed to the rising cases in China, where authorities have banned large-scale events and exhibitions. The Australian dollar is often viewed as a proxy for commodity prices.
The pair also declined as the US Senate neared a $1 trillion infrastructure package that will see the country rebuild some key infrastructure like roads and bridges. The senators continued their deliberations overnight and there is a possibility that the bill will be signed soon. Still, there are concerns that the bill does not go further enough and that its impact to the American economy will be muted.
AUD/USD Technical Analysis
The AUD/USD pair has been in a bearish trend in the past few weeks. That has seen it decline from 0.7890 to today’s low of 0.7318. On the four-hour chart, the pair has dropped below the 25-day and 15-day moving averages. It has also moved below the important resistance level at 0.7415. Oscillators like the Relative Strength Index (RSI) have also been in a downward trend. Therefore, the pair will likely keep falling as bears target the next key support at 0.7800.
