Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.7100.
- Add a stop-loss at 0.7250.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.7200 and a take-profit at 0.7300.
- Add a stop-loss at 0.7170.
The AUD/USD pair was a bit volatile on Monday morning as investors assessed the impact of the latest ban of some Russian banks from the SWIFT system. Investors are also waiting for the upcoming interest rate decision by the Reserve Bank of Australia (RBA) and key economic data.
RBA decision ahead
The RBA will deliver its second interest rate decision of the year on Tuesday morning. Analysts will be paying close attention to the decision since it will be the first one since Russia decided to invade Ukraine last week.
The decision comes at a time when economic data points to a strong economic recovery in Australia. Recent data revealed that the unemployment rate has moved to lower levels than where it was before the pandemic started. At the same time, the closely-watched wage price index (WPI) has moved above the RBA target.
The Australian economy is also expected to continue its recovery process now that the country has reopened its borders to foreign travelers. Indeed, flash manufacturing and services PMI numbers published last week showed that business activit was rebounding.
Meanwhile, investors are looking at the impact of the decision to exclude some Russian financial entities from the global financial system. Analysts expect that these measures will have some impact on the Australian economy. For one, the volume of natural gas from Australia will likely keep rising.
The other key economic data to watch this week will be Australia’s exports and imports that will come out on Thursday and the second estimate of the GDP figure that will be published on Wednesday. Analysts expect the data to show that Australia’s economy contracted by about 2.7% in the fourth quarter.
AUD/USD Forecast
The AUD/USD pair dropped sharply last week after Putin announced his Ukrainian invasion. It moved to a low of 0.7095, which was the lowest level since February 22. The pair then rebounded as investors assessed the initial package of sanctions against Russia.
The pair is trading at 0.7180, which is almost 2% above the lowest level last week. It has moved slightly above the 25-day and 50-day moving averages. It is also slightly above the descending trendline shown in black.
Therefore, there is a likelihood that the pair will resume the bearish trend today as investors assess the impact of SWIFT sanctions to the global economy. The key level to watch next will be at 0.7100.
