Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6712.
- Add a stop-loss at 0.6750.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6770 and a take-profit at 0.6850.
- Add a stop-loss at 0.6700.
The AUD/USD pair rallied to its highest level since January 2nd as the weaker dollar environment continued. It rose to a high of 0.6800, higher than April’s low of 0.6365 as the focus shifted to the US retail sales data.
Dovish Fed Chair statement
The AUD/USD pair held steady after relatively dovish statements by Fed’s Jerome Powell and Mary Daly.
In a speech, Powell said that he was pleased with the last three US inflation data, which showed that prices have started falling. The latest consumer price index (CPI) data released on Thursday showed that the headline and core CPI numbers eased to 3.0% and 3.2%, respectively.
Powell also noted that he was getting concerned about the labor market, which has softened a bit. While the economy is adding thousands of jobs each month, recent data showed that the jobless rate was ticking up and now stands at its highest point since 2021.
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Mary Daly, the head of the San Francisco Fed reiterated the same view and warned about the labor market. In her past statements, she has advocated for at least one rate cut this year if inflation continues falling.
The upcoming US retail sales data will be important because they will show the health of the American consumer. Just recently, consumer-facing retail companies like PepsiCo and Conagra Brands have warned that consumer spending was slowing.
Economists expect the data to show that the headline retail sales dropped by 0.1% in June while the core sales rose by 0.2%. If these numbers come out as expected, they will boost the case for a rate cut in September.
The AUD/USD pair also rose slightly after China published a set of weak economic reports. The country, which is Australia’s trading partner, grew by 4.7% in the second quarter, missing the expected growth of 5.1%. Retail sales rose by 2.0%, missing the expected 3.3%, showing the economy was slowing.
AUD/USD technical analysis
The AUD/USD pair has been rising recently as the US dollar index continued its sell-off. It recently crossed the key resistance point at 0.6712, its highest level in May this year.
The pair also flipped the key resistance point at 0.6662, the neckline of the inverse head and shoulders pattern. It has also remained above the 50-day Exponential Moving Average (EMA) while the Relative Strength Index (RSI) has formed an ascending channel.
The pair will likely have a small pullback as sellers target the key support point at 0.6712 and then resume the bullish trend.
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