Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6663.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6635 and a take-profit at 0.6750.
- Add a stop-loss at 0.6525.
The Australian dollar sell-off continued on Thursday as risks to the banking sector continued. The AUD/USD pair plunged to a low of 0.6597, the lowest level since March 15. In all, the pair has dropped in the past five straight days.
Banking concerns return
The AUD/USD pair continued falling on Thursday as traders reacted to Australia’s inflation numbers. The data revealed that the country’s inflation continued dropping in the first quarter of the year. According to the statistics agency, the headline consumer inflation dropped to 7.0% in Q1. The trimmed mean CPI dropped to 6.6%.
The consensus view among traders and economists is that inflation in the country has peaked. The same is true with the pace of interest rate hikes. Most economists expect that the RBA will decide to leave interest rates unchanged when it meets next week. On the other hand, in the US, analysts believe that the Fed has at least one more rate hike to implement.
The main concern in the financial market is the safety of First Republic Bank, a company that lost over $100 billion in deposits in the first quarter. As a result, the company announced that it will lay off workers as it searches for viable strategic options. Investors are unconvinced, which led to a major sell-off in the stock.
There will be no important economic data from Australia on Thursday. As such, traders will focus on the upcoming US GDP and jobless claims numbers. Economists believe that the American economy grew slightly in the first quarter despite the banking crisis. Precisely, they expect that the economy grew by 2% after expanding by 2.6% in Q4.
The US will also publish the latest pending home sales numbers and purchases consumption index, which is the Fed’s favorite inflation gauge.
AUD/USD technical analysis
The Australian dollar made an important bearish breakout this week when it moved below the lower side of the ascending channel at 0.6656. It also crossed the important support point at 0.6622, the lowest point on April 7.
The pair is below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) moved to the oversold level. Therefore, the pair will likely continue falling as sellers target the next support at 0.6500. This view will be confirmed if it moves below last month’s low of 0.6554.
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