Bearish view
- Sell the AUD/USD pair and set a take-profit 0.6457.
- Add a stop-loss at 0.6525.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6515 and a take-profit at 0.6615.
- Add a stop-loss at 0.6465.
The AUD/USD sell-off accelerated as it plunged to the lowest level since June 1st. The pair dropped to a low of 0.6485, which was much lower than last month’s high of 0.6892. As it retreated, the US dollar index (DXY) remained above the support at $102.
Energy concerns remain
The biggest catalyst for the Australian dollar is the ongoing threat of strikes by workers in Australia. A full strike by these workers would have major implications for the Australian economy.
For one, it will lead to higher energy prices since it would eliminate about 11% of the global LNG market. As a result, it would push more Australian companies to reduce their output, leading to higher prices.
The AUD/USD pair also retreated because of the US dollar's strength. After dropping below $100 a few weeks ago, the dollar index has jumped to over $102. One of the reasons for this is that investors have embraced a risk-on sentiment after Moody’s downgraded America’s banks.
The AUD/USD pair will have several important catalysts this week. On Tuesday, China will publish its important economic numbers for July. Economists expect more weak data, signaling that the economic recovery has faltered. Chinese economic numbers are important for Australia because it exports most of its products to the country.
The pair will also react to the latest minutes by the Federal Reserve scheduled for Wednesday. These minutes are expected to provide more information about the last meeting. Analysts expect that last week’s inflation numbers meant that the bank will have room to pause hiking rates.
AUD/USD forecast
The AUD/USD pair has been in a strong bearish trend after confirming a double-top pattern on July 14th. It broke and retested the neckline of this pattern last week. It also dropped below the important support level at 0.6513 (August 3 low) on Friday.
The AUD/USD pair has moved below the 25-day and 50-day moving averages. It is also below the Ichimoku cloud. Therefore, the outlook for the pair is bearish, with the next level to watch being at 0.6457, the lowest point on May 31st. The stop-loss of this trade is at 0.6525.
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