Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6700.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bearish view
- Set a buy-stop at 0.6655 and a take-profit at 0.6700.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate pulled back after the strong US consumer confidence report triggered a risk-off sentiment. The Aussie tumbled to a low of 0.6650 in the overnight session, down from Monday’s high of 0.6680.
US consumer confidence rose
The US dollar index bounced back after the US published consumer confidence data. According to the Conference Board, the country’s confidence jumped from 97.5 in April to 102 in May, higher than the median estimate of 96. It was the first time that the figure has not dropped in three months.
Consumer confidence is one of the most economic numbers because of the role of the American consumer to the economy. For a long time, consumer spending is the biggest part of the Gross Domestic Product (GDP).
Highly confident consumers spend more and help to boost the economy. However, it can also lead to higher or stickier inflation over time. Therefore, the report signalled that the Fed will maintain a hawkish tone in the coming months.
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That explains why the US dollar index (DXY) rose to $104.50 while American stocks tumbled. The Dow Jones and the S&P 500 indices tumbled by over 360 and 25 points, respectively. At the same time, the VIX index rose by almost 10%.
The AUD/USD pair also retreated after the latest Australian monthly CPI indicator. According to the country’s statistics agency, the Consumer Price Index (CPI) dropped from 3.50% in March to 3.40% in April. The report means that inflation has remained above the RBA’s target of 2.0%.
The next important event will be the upcoming Beige Book, a document that shows the views of regional Federal Reserve leaders on the state of the economy. This report will come out a few days before the US publishes the latest PCE inflation data.
AUD/USD technical analysis
The Australian dollar pulled back after the strong US consumer confidence data. It pulled back from this week’s high of 0.6680 to a low of 0.6643. On the 4H chart, it has retested the crucial support level at 0.6645, its highest swing in April and May 3rd.
The pair has found support at the 50-period moving average and the Woodie pivot point. At the same time, the AUD/USD pair’s MACD indicator has moved to the neutral point. Therefore, the pair will likely remain in the current range on Wednesday. The key support and resistance points to watch will be at 0.6600 and 0.6700.
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