Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6500.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6425 and a take-profit at 0.6525.
- Add a stop-loss at 0.6325.
The Australian dollar continued its downward trend as the USD strength accelerated. The AUD/USD pair retreated to a low of 0.6380, the lowest level since November 2022 as investors refocused on the upcoming US inflation data. It has dropped by more than 10% from the highest point this year.
US inflation data ahead
The AUD/USD sell-off continued even as Federal Reserve officials sounded a bit dovish in their recent statements. Most of them who spoke on Friday supported pausing rate hikes in the coming meeting.
In her statement, Lorie Logan, the head of Dallas Fed said that while the bank has not won its battle against inflation, the complex economic environment required a carefully calibrated approach.
Other Fed officials who supported pausing rates in the upcoming meeting were John Williams and Christopher Waller.
Therefore, investors and traders will pay a close attention to the upcoming US consumer inflation data scheduled for Wednesday. Economists polled by Reuters expect the data to show that consumer prices rose again in August.
Precisely, they expect the headline CPI rose from 0.2% in July to 0.6% in August. If this happens, it will be the second straight month that inflation rose. They also expect that inflation rose from 3.2% to 3.6%. On the other hand, analysts expect that core inflation fell from 4.7% to 4.3% in the month.
The other catalyst for the AUD/USD pair will be the prices of crude oil, which is a major inflation driver. Brent, the international benchmark, was trading at $90.44 while the West Texas Intermediate (WTI) rose to $87.23. Oil has risen by over 20% from the lowest level in June.
AUD/USD technical analysis
The AUD/USD pair made a double-top pattern at 0.6892 in June and July. It then dropped below the neckline of this pattern at 0.6600 on August 1st. The pair also retreated below the important support at 0.6454, the lowest level on May 31st.
The pair has moved below the 25-period volume-weighted moving average (VWMA) while the Relative Strength Index (RSI) has dropped below the neutral point. Therefore, the pair will likely continue falling, with the next level to watch being 0.6300, the first support of the Woodie pivot point.
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