Bearish View
Sell the AUD/USD and add a take-profit at 0.7560.
Add a stop-loss at 0.7500.
Timeline: 1-2 days.
Bullish View
Buy the AUD/USD and add a take-profit at 0.7670.
Add a stop-loss at 0.7560.
The AUD/USD price declined as the market reacted to the ongoing government bond sell-off and the overall strong US dollar. It is trading at 0.7600, which is almost 1% below this week’s high of 0.7665.
Strong Australian Data
The AUD/USD reacted mildly to the relatively strong data from Australia. Earlier today, data by the country’s statistics agency showed that building approvals increased by 21.6% in February after dipping by 19.4% in the previous month. This comeback was better than the median estimate of a 5.0% increase.
This growth was mostly because of a 15.1% jump in private house approvals. Also, in the past few months, house prices have rallied as demand from locals and foreigners has risen. This is mostly because of the relatively low-interest rates and government stimulus packages.
The AUD/USD also reacted to the relatively strong Manufacturing and Non-Manufacturing PMI numbers in China. According to China Logistics, the Manufacturing PMI increased from 50.6 to 51.9, better than the estimated 51.0.
The Non-Manufacturing PMI rose from 51.4 to 56.3 while the Composite PMI rose from 51.6 to 55.3. This growth happened as most people in China moved on after February’s lunar new year. Chinese data is important for Australia since the country is the biggest buyer of Australian goods and services.
The ongoing bond sell-off in the United States and other countries also affected the Australian dollar. The 10-year government bond yield has risen to more than 1.74% as investors start pricing-in for higher inflation in the near term. The same trend is happening in Australia, where the 10-year yield has risen to 1.8%.
AUD/USD Technical Forecast
The AUD/USD pair declined to a low of 0.7585 in the Asian session. On the four-hour chart, this price is slightly below the important support at 0.7620, which was the lowest level on March 5. It has also moved below the 25-day moving average. Notably, the pair seems to be forming a double bottom pattern, with the lower part being at 0.7565 and the neckline being at 0.7660. Therefore, in the near term, the pair may continue falling as bears target the lower side of the double bottom at 0.7565. The invalidation point for this trade will be a move above 0.7660.
