Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.700.
- Add a stop-loss at 0.6900.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6900 and a take-profit at 0.6800.
- Add a stop-loss at 0.7000.
The AUD/USD price retreated sharply as the US dollar maintained its bullish trend. It fell to a low of 0.6940, which was the lowest level since May 16th. It has fallen by more than 4% from its highest point this month.
US dollar strength
The AUD/USD pair continued its bearish trend amid the rising worries of a more hawkish Federal Reserve. Analysts expect that the Fed will continue with its quantitative tightening (QT) policy and then hike interest rates at a faster pace.
These worries have led to a major crash in key assets. For example, American and Australian stocks crashed hard. The ASX index declined by more than 4% and entered a bear market
Similarly, cryptocurrencies and commodities also continued falling. For example, the closely watched Bloomberg Commodity Index declined by more than 1.8%. This is notable since Australia is one of the biggest commodity exporters globally.
The AUD/USD pair also retreated after China restarted some of its Covid restrictions. Important cities like Beijing and Shanghai announced that they will restart some lockdowns and restrictions after they discovered some more cases.
More lockdowns in China have an impact on the Australian economy since it is the biggest buyer of Australian commodities.
The pair declined after worries of more weakness in Australia and around the world continued. In a statement, the Chief Investment Officer of AustralianSuper warned that the country was heading for a material downturn. The company’s flagship fund is expected to have its first loss in 13 years.
His statement came a week after the Reserve Bank of Australia (RBA) decided to hike interest rates by 0.50%. Analysts now expect that the RBA will raise interest rates to 3.1% by end of the year.
AUD/USD signal
The AUD/USD pair continued falling as the US dollar strength continued. It managed to move below the important support at 0.6970, which was the first support of the standard pivot points. It also declined below the 25-day and 50-day moving averages while the Relative Strength Index declined to the extreme oversold level of 20.
Therefore, the overall outlook for the pair is bearish ahead of the upcoming FOMC decision. However, the pair will likely have a relief rally as some investors buy the dips. If this happens, the next key point will be at 0.700.
