Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6641.
- Add a stop-loss at 0.6525.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6580 and a take-profit at 0.6500.
- Add a stop-loss at 0.6650.
The AUD/USD exchange rate bounced back after tumbling to its November low last week. It rebounded to a high of 0.6600 on Monday as traders bought the dip and embraced a risk-on sentiment.
Risk-on sentiment
The AUD/USD price bounced back even after Australia’s statistics agency published a weak jobs report. In it, the agency said that the labor participation rate dropped from 67.3% in November to 66.8% in December. The economy also lost over 65.1k jobs during the month, worse than the expected increase of 17.6k.
These numbers meant that the Australian economy was slowing and that the central bank will likely maintain rates at the current level for a while. Australia is also facing challenges as commodity prices like lithium, iron ore, and copper retreat. China, its biggest trading partner is also not doing well.
The AUD/USD pair also as traders embraced more risk as evidenced by the performance of bonds and equities. In the US, the 10-year and 30-year government bond yields retreated to 4.13% and 4.33%, respectively.
At the same time, the main indices like the Dow Jones, Nasdaq 100, and S&P 500 indices continued rallying and moved to their all-time highs. This is a sign that traders are ignoring the ongoing market risks such as the crisis in the Middle East continued.
There are signs that the crisis in the region will continue after Iran hit a US military base in Iraq, injuring some troops. According to media reports, the US is considering more attacks on Houthi rebels as they continue disrupting sea travel in the Red Sea.
Geopolitics will be the key driver for the AUD/USD pair this week since there will be no major Australian economic data. The only important US data will be the upcoming GDP and PCE reports set for Thursday and Friday, respectively.
AUD/USD forecast
The AUD/USD pair has bounced back in the past two trading sessions as the risk-on sentiment prevails. On the 4H chart, the pair has retested the second support of the Woodie pivot point and the 50% Fibonacci Retracement level. It remains below the 50-period Exponential Moving Average (EMA).
The two lines of the MACD and the Relative Strength Index (RSI) are pointing upwards. Therefore, the pair will likely continue rising as buyers target the first support of the Woodie pivot point at 0.6641. The alternative scenario is where the pair resumes the downtrend and retests the support at 0.6525.
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