Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6450.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6555 and a take-profit at 0.6620.
- Add a stop-loss at 0.6485.
The AUD/USD pair remained under pressure this week as iron ore prices continued falling and as traders repositioned for the Australian inflation data and Federal Reserve interest rate decision. It was trading at 0.6550, much lower than this month’s high of 0.6790.
Australia inflation report
The Aussie has slumped recently as traders adjusted their Reserve Bank of Australia (RBA) rates expectations. Earlier this month, the expectation was that the bank would hike interest rates later this year as it guided in the last meeting.
Recently, however, economic numbers showed that the Australian and Chinese economies were slowing. In China, the economy expanded by 4.7% in the second quarter, lower than the expected 5.3%.
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As a result, the prices of some of the top commodities that Australia exports like coal and iron ore have retreated in the past few weeks.
In Australia, the labor market has come under pressure as the unemployment rate remained unchanged at 4.0%.
Therefore, the expectation is that the RBA will leave interest rates unchanged in its meeting next week.
Australia will publish its inflation data on Wednesday. Economists expect the report to show that the headline CPI rose by 1.0% QoQ in the second quarter. On a YoY basis, analysts expect the numbers to show that inflation rose to 3.8% as it moved further away from the bank’s target of 2.0%.
The Australian Bureau of Statistics (ABS) will also publish the latest retail sales data on Wednesday.
Elsewhere, in the US, the Conference Board will publish July’s consumer confidence data on Tuesday as the FOMC starts its two-day monetary policy meeting. The Fed is not expected to cut rates in this meeting but it could point to a rate cut in September.
Traders will also focus on the US jobs data. The BLS will release the JOLTs job openings report on Tuesday and the official NFPs on Friday. ADP will release its estimate of the private sector payrolls.
AUD/USD technical analysis
The AUD/USD pair has been in a steep sell-off in the past few weeks. It has dropped from the second resistance of the Woodie pivot point at 0.6790 to 0.6550. The pair has found some support at the second Woodie support level.
At the same time, the Average Directional Index (ADX) has pointed upward, signaling that trend is continuing. The histogram of the MACD has moved below the neutral point while the pair has moved below the 50-day moving average.
It has also formed a bearish flag point, meaning that the sell-off could continue in the next few days. If this happens, it could drop and retest the key support level at 0.6450.
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