Bearish View
Sell the AUD/USD pair and set a take-profit at 0.7250.
Add a stop-loss at 0.7350.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 0.7340 and a take-profit at 0.7400.
Add a stop-loss at 0.7250.
The AUD/USD pair declined in the overnight session after the relatively weak Chinese and American economic data. The pair dropped to 0.7300, which was the lowest level since August 30th.
Chinese Economic Data
China is the biggest buyer of Australian goods. Therefore, its economic numbers tend to have an impact on the AUD/USD pair. Earlier today, the country published relatively weak economic numbers because of the recent COVID wave in the country.
According to the statistics agency, the Chinese retail sales declined from 8.5% in July to 2.5% in August. This was significantly lower than the median estimate of 7.0%.
The same trend happened in other areas. For example, house prices dropped from 10.3% to 8.9% while industrial production fell from 6.4% to 5.3%. These numbers signal that the Chinese economy will grow at a slower pace in the third quarter.
Meanwhile, the AUD/USD also reacted to the relatively weak American inflation data. The numbers revealed that the country’s Consumer Price Index (CPI) declined from 5.4% in July to 5.3% in August. Excluding the volatile food and energy products, the American consumer prices declined to 4.0%. Still, the Federal Reserve will likely maintain its hawkish sentiment in the upcoming meeting.
The next key mover for the pair will be the latest Australian employment numbers scheduled for Thursday. The data is expected to show that the country’s unemployment rate rose from 4.6% to 4.9% as New South Wales and Victoria locked down. Economists polled by Reuters expect other data to show that the country lost more than 90k jobs in August after adding 2.2k in the previous month. The participation rate is expected to have dropped from 66% to 65.7%.
AUD/USD Technical Outlook
The four-hour chart shows that the AUD/USD pair has been in a bearish trend in the past few weeks. It has already moved from a high of 0.7478 to 0.7300. Along the way, it has moved below the 38.2% Fibonacci retracement level. Additionally, it has declined below the 25-day moving average while the Stochastic Oscillator has moved below the oversold level.
Therefore, the pair will likely maintain a bearish trend as bears target the 61.8% Fibonacci retracement level at 0.7250. On the flip side, a jump above the key resistance at 0.7340 will invalidate the bullish view.
