Bullish view
Bearish view
- Set a sell-stop at 0.6750 and a take-profit at 0.6650.
- Add a stop-loss at 0.6900.
The Australian dollar rallied to an important resistance level ahead of the upcoming American inflation data and as concerns of the American economy continued. The AUD/USD pair retested the key level of 0.6800, the highest point in April.
Recession risks remain
The US published strong consumer jobs numbers on Friday, signaling that the economy was doing well. In a statement, the Bureau of Labor Statistics said that the unemployment rate dropped to 3.4% in April, the lowest level since 1969.
Despite these numbers, there are concerns that the American economy will still move to a mild recession later this year. A likely reason for this is the ongoing credit squeeze in the regional bank industry following the collapse of First Republic Bank and Silicon Valley Bank.
This view was confirmed by Austan Goolsbee, the head of the Chicago Federal Reserve. He warned that the credit market will continue tightening in the coming months. Further, he cited the ongoing concerns about the debt ceiling issue in the United States. President Joe Biden and Kevin McCarthy will meet on Tuesday to deliberate on a plan.
The central bank official, who took part in hiking rates last Wednesday, said that the bank will now consider the situation in the banking sector when setting the next interest rates. Most regional banks, including Western Alliance and Comerica are still at risk.
There will be no economic data from the US and Australia today. Therefore, the next key data to watch will be the upcoming inflation numbers scheduled for Wednesday. Wall Street expects that the headline consumer inflation rose by 5% in April and by 0.4% on a month-on-month basis. The core CPI is expected to come in at 5.4%, down from the previous 5.6%.
AUD/USD technical analysis
The AUD/USD pair has been in a bullish trend in the past few days. It rose to a high of 0.6800 on Monday, the highest point on April 14 and 4th. The pair also rose to the 38.2% Fibonacci Retracement level. Further, it has moved above the 25-day moving average.
Therefore, the pair will likely continue rising as buyers target the 50% retracement level at 0.6900. This view will be confirmed if the pair moves above the key resistance point at 0.6805. A move below the support at 0.6720 will invalidate the bullish view.
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