Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.7300.
- Add a stop-loss at 0.7450.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 0.7450 and a take-profit at 0.7550.
- Add a stop-loss at 0.7350.
The AUD/USD pair slipped to the lowest level since March 22 as investors refocused on the upcoming Australian election and the rising bond yields. The pair is trading at 0.7420, which was about 3.17% below the highest level this week.
Australian Election
The Australian dollar sell-off continued as investors focused on the upcoming Australian election. The current prime minister, Scott Morrison, will face off with Anthony Albanese, the Labor leader. Analysts expect that Morrison will win although the race is expected to be close. And a lot can change between now and the election date. Therefore, the AUD/USD pair declined as investors wait on this election.
The pair is also falling because of the overall strong US dollar. The US dollar index has jumped to $100, which was the highest point since May 2020. It has also risen by more than 11% from its lowest level in 2020.
The AUD/USD pair has been in a strong bearish trend because of the strong US inflation and the performance of the bond market. The 10-year bond yield rose to 2.78% while the 30-year yield rose to 2.83%. The 2-year bond yield retreated slightly to 2.5%. This performance is mostly because of the rising expectations that the Fed will continue hiking interest rates and then embrace a quantitative tightening policy.
The pair will next react to the latest American consumer inflation data scheduled for Tuesday. Economists expect the data to show that the country’s consumer inflation jumped to 8.4% in March while core inflation rose to 6.6%.
The data will come a day after the New York Fed published the latest inflation expectation data from the US. The US public expects that inflation will be at 6.6% in March 2023, which is higher than what they were expecting.
AUD/USD Forecast
The AUD/USD pair has been in a strong bearish trend in the past few weeks. It has managed to move to the 50% Fibonacci retracement on the three-hour chart. It has dropped below the 25-day and 50-day moving averages. It also moved between the lower and middle lines of the Bollinger Bands while the Money Flow Index (MFI) has formed a bullish divergence pattern. Therefore, the pair will likely keep falling as bears target the next key support level at 0.7300.
