Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6225.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6225.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate retreated for the third consecutive day after hitting a crucial resistance level last week. This retreat continued as geopolitical risks rose and after the US published a weak consumer confidence report. It moved to a low of 0.6350, a few points below this month’s high of 0.6410.
The AUD/USD pair retreated as economic risks rose. One of the key risks is that Donald Trump seems serious about ratcheting his trade war against American foes and friends. He has placed a 25% tariff on steel and aluminum, a move he hopes will help save manufacturing jobs.
Trump has also hinted that he will continue with his export control against China, a move he believes will prevent it from building advanced technologies. A trade war between China and the United States will have an impact on Australia, a country that does a lot of business with the former.
The AUD/USD exchange rate also retreated after the Conference Bureau released the latest consumer confidence data. This report showed that confidence fell at the fastest pace since 2021 as concerns about inflation and mass firings by the government continued.
Consumer confidence dropped by 7 points to 98.3, the third consecutive month of falling. This is a key data that may impact the economy since consumer spending is the biggest part of the American GDP.
The AUD/USD will have no major catalyst on Wednesday other than the US housing starts and building permits numbers. Historically, these numbers don’t have a major impact on the US dollar.
The US will then release the latest GDP data on Thursday and the personal consumption expenditure report on Friday.
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AUD/USD technical analysis
The daily chart shows that the AUD/USD pair rose to a crucial resistance level at 0.6411 last week. This was an important level since it was along the 38.2% Fibonacci Retracement level. In most cases, an asset often pulls back after hitting an important retracement point.
The pair has moved above the 50-day moving average and is sitting at the major S/R pivot point of the Murrey Math Lines. It has formed a small inverse head and shoulders pattern. Therefore, it will likely rebound and move to the 50% retracement point at 0.6500. A move below the support at 0.6230 will invalidate the bullish view.
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