Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6770.
- Add a stop-loss at 0.6900.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6880 and a take-profit at 0.6950.
- Add a stop-loss at 0.6800.
The AUD/USD price crashed hard during the American and Asian sessions as the US dollar continued its bullish trend. The pair dropped to a low of 0.6860, which was 1.50% below the highest point on Tuesday.
US dollar strength continues
The Australian dollar declined sharply as the US dollar rally continued after the strong American consumer confidence data. According to the Conference Board, consumer confidence rose from 95.3 in July to 103.2 in July. It was the first time in three months that confidence rose. Economists polled by Reuters were expecting the data to show that confidence rose to 97.9.
The bureau said that this rising confidence was due to trends in gasoline prices. After peaking above $5 per gallon in June, gas prices crashed to $3.50. According to the survey, consumers were more optimistic about the coming six months about the labor market and business outlook.
In addition, the present situation index rose for the first time since March to 145.4. Therefore, these numbers reinforce the view that the Fed will continue hiking interest rates in the coming months.
In a statement to the Wall Street Journal, New York Fed president, John Williams said that rates need to keep rising in the coming months. He estimated that interest rates will need to hike to 3.5% from the current range of 2.25% and 2.5%. In addition, he said that rates will need to remain higher for a while even as inflation keeps falling.
His statement mirror those of Jerome Powell when he spoke at the Jackson Hole Synposium last week. In his keynote speech, he said that the bank will continue hiking rates. As such, analysts expect the bank will hike interest rates by either 0.50% or 0.75% in September.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has formed a head and shoulders pattern. In price action analysis, this pattern is usually a bearish sign. It has also moved below the standard pivot point and is approaching the first support. It moved below the 25-day and 50-day moving averages while the MACD has moved below the neutral point.
Therefore, the pair will likely continue falling as sellers target the second support at 0.6770, which was the lowest level since July 15. A move above the resistance level at 0.6900 will invalidate the bearish view.
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