Bearish View
- Sell the AUD/USD and set a take-profit at 0.7045.
- Add a stop-loss at 0.7160.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7140 and a take-profit at 0.7230.
- Add a stop-loss at 0.7080.
The AUD/USD crawled back after the Australian government announced further reopening plans. It also rose after the strong quarterly retail sales numbers from the country. It is trading at 0.7110, which is about 80 basis points above the lowest level on Friday last week.
Australia Reopening
The Australian dollar rose slightly on Monday after the Australian government announced that it will reopen its borders to international travelers on February 21st. People arriving in the country will need to be vaccinated against Covid-19.
Unvaccinated people with a medical reason will need to apply for a travel exemption and be ready to isolate for a while.
Analysts believe that this is the right decision by the Australian government considering that more people have already been vaccinated. The reopening will help to boost the country’s economy, especially the services sector that has been hurt by the lockdown.
The AUD/USD pair also rose after Australian retail sales numbers. According to the country’s bureau of statistics, retail sales declined by 4.4% in January after rising by 7.3% in December. That decline was in line with what analysts were expecting. Another data showed thay the sales jumped by 8.2% in the fourth quarter due to the holiday season.
Meanwhile, according to the Australian Industry Group (AIG), the services PMI increased from 49.6 in December to 56.2 in January. The services sector will continue doing well as the country reopens its borders.
Therefore, the AUD/USD pair rose because the action by the Australian government will give the Reserve Bank of Australia (RBA) the impetus to start hiking interest rates. In a statement last week, the RBA governor refused to rule out a situation where the bank hikes rates this year.
AUD/USD Forecast
The AUD/USD pair tilted higher during the Asian session as investors reacted to the latest data from Australia. The pair is trading at 0.7110, which is slightly above last week’s low of 0.7050. On the four-hour chart, the pair moved slightly above the 25-day and 50-day moving average. It also managed to move above the key support at 0.7083, which was the lowest level on December 20th.
Therefore, I suspect that the pair will resume the bearish trend since it has already retested the important level at 0.7110. A break and retest pattern is usually a sign that the original trend will continue. If this happens, the next level to watch will be at 0.7025.
