Bullish view
- Buy the AUD/AUD pair and set a take-profit at 0.6415.
- Add a stop-loss at 0.6200.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6900.
- Add a stop-loss at 0.6415.
The AUD/USD exchange rate has staged a strong surge after dropping to a multi-year low last week as the trade war escalated. The pair initially dropped to 0.5911 on April 9, and then soared to the current 0.6300.
RBA minutes ahead
The AUD/USD exchange rate has soared in the past few days, primarily because of the falling US dollar. The closely watched dollar index has plunged to a low of $99, its lowest level in over three years as concerns about the American economy continued.
Investors are increasingly worried about the American economy now that Donald Trump has launched a trade war affecting all countries, including Australia, which received a 10% tariff. Trump has targeted the country for banning its animal products like beef and pork.
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Many analysts have warned that the US was on a path towards a recession this year as tariffs will lead to higher cost of doing business and affect consumer confidence. Indeed, data released last Friday by the University of Michigan showed that consumer confidence has plummeted.
The Australian economy will also be affected by the ongoing tensions between the US and China. Just last week, the two superpowers engaged in a game of chicken that led to US tariffs on Chinese goods rising to 145% and those on its goods to China to 125%. These tariffs matter because China is the biggest market for Australian goods like coal and steel.
The next key catalyst for the AUD/USD pair will be the upcoming minutes by the Reserve Bank of Australia (RBA). These minutes will provide more information about the last meeting and hints on what to expect in the next ones.
In a statement on Friday, Governor Michelle Bullock called for patience as it assesses the impact of tariffs on the economy. Some analysts have called for a jumbo rate cut to help the economy deal with the recession jitters.
AUD/USD technical analysis
The daily chart shows that the AUD/USD pair has gone parabolic in the past few days as the DXY index plunged. It has formed a three white soldiers pattern, which happens when there are three consecutive bullish candlesticks.
The pair has moved above the 50-day and 25-day moving averages and the bottom of the trading range of the Murrey Math Lines tool. Also, the Relative Strength Index (RSI) has pointed upwards, a sign that the pair is gaining momentum.
Therefore, the pair will likely continue rising, with the next key level to watch being at 0.6415, the highest point on February 20. A drop below the psychological level at 0.6200 will invalidate the bullish outlook.
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