The pair will likely keep falling as bears target the key support level at 0.7330, which is along the 38.2% Fibonacci retracement level.
- Sell the AUD/USD and set a take-profit to 0.7330.
- Add a stop-loss at 0.7450.
- Timeline: 1-2 days.
- Set a buy-stop at 0.7420 and a take-profit at 0.7475 (Friday high).
- Add a stop-loss at 0.7300.
The AUD/USD price retreated in the overnight session amid a broader greenback rebound that saw the dollar index rise by more than 0.45%. The pair declined to a low of 0.7375, which was the lowest level since September 2.
RBA Tapering Goes On
The AUD/USD pair formed a double-top pattern after the Reserve Bank of Australia (RBA) interest rate decision.
The central bank decided to leave interest rates intact at 0.10% where they have been in the past 13 months. This decision was in line with expectations since the bank does not expect to hike any time soon.
The bank also confirmed that it would trim the size of its asset purchases to A$4 billion per week until February next year. This QE will be relatively lower than the previous weekly purchases of about A$5 billion.
In this decision, the central bank decided to lower the size of asset purchases but extend their duration as the country battles the new wave of the pandemic.
This pandemic has mostly affected New South Wales (NSW) and Victoria, states that represent about 55% of the country's GDP. Indeed, data published last week showed that the country’s manufacturing and services PMIs declined in August. Data published earlier today showed that the country’s business confidence was slipping. Other August numbers like retail sales and employment will likely be subdued.
The AUD/USD decline was mostly because of the relatively stronger US dollar. The dollar index had its biggest daily decline in months in the overnight session. Some analysts cited the fear of slow growth as countries like the US and the Eurozone prepare to scale down their monetary and fiscal support.
The next key mover of the AUD/USD price will be the latest US JOLTs job openings data. The data is expected to show that the number of openings declined to 10 million from the previous 10.07m.
AUD/USD Technical Analysis
The four-hour chart shows that the AUD/USD pair formed a double-top pattern at 0.7477 on Tuesday. It then declined and moved below the ascending black trendline.
The pair then moved below the 23.6% Fibonacci retracement level and moved below the 25-day moving average. Therefore, the pair will likely keep falling as bears target the key support level at 0.7330, which is along the 38.2% Fibonacci retracement level.