Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6380.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6350 and a take-profit at 0.6400.
- Add a stop-loss at 0.6300.
The AUD/USD pair was under pressure on Monday morning as investors reacted to the ongoing fears in the market. The pair retreated to 0.6333, as traders embraced a risk-off sentiment. This price was still higher than last week’s low of 0.6270.
Risk-off sentiment
The AUD/USD pair has pulled back in the past few days as investors embraced a risk-off sentiment. On Friday, American equities continued falling, with the S&P 500 index falling by 20 points as it moved to a correction zone. The Dow Jones and the Nasdaq 100 indices also plunged by more than 1%.
In Australia, the ASX 200 index has plunged to A$6,826, the lowest level in more than a year. It dropped by more than 0.50% on Monday morning. At the same, Australia’s bond yields have continued rising, with the ten-year sitting at 4.81%.
The same is happening in the United States, where bond yields have surged to the highest level in more than a decade. Therefore, there are concerns that the US and Australian economies are at significant risks as the war between Israel and Hamas continues.
In Australia, inflation remains stubbornly high. The latest economic data showed that the headline Consumer Price Index (CPI) rose to 6.2% in the second quarter, higher than the RBA’s target of 2.0%. In a recent note, RBA’s Michele Bullock, the head of the RBA said that services inflation was proving sticky.
The next key economic event to watch will be the upcoming interest rate by the Federal Reserve. Economists polled by Reuters believe that the bank will leave interest rates unchanged between 5.25% and 5.50%.
The Fed’s decision comes at a time when the economy is going through a tough period as bond yields have risen.
AUD/USD technical analysis
The AUD/USD exchange rate has been under pressure in the past few days. It has moved below the descending trendline that connects the highest swings since September 29th. The pair is also consolidating at the 25-period and 50-period ALMA indicators.
The pair has formed a descending triangle pattern that is shown in red. This pattern is one of the most accurate bearish signs. It has also dropped below the Ichimoku Cloud indicator. Therefore, the pair will likely continue falling as sellers target the key support at 0.6300.
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