The pair will likely keep falling as bears target the key support at 0.7050.
Sell the AUD/USD and add a take-profit at 0.7050.
Add a stop-loss at 0.7180.
Timeline: 1-2 days.
Set a buy-stop at 0.7150 and a take-profit at 0.7250.
Add a stop-loss at 0.7050.
The AUD/USD pair sell-off accelerated on Monday as concerns about the new Covid-19 variant remained. The pair dropped to a multi-month low of 0.7115, which was the lowest level since August. This was 5.7% below its October high of 0.7550.
The AUD/USD pair tumbled sharply as Australia became one of the few countries to detect the new Omicron variant. The country’s health ministry confirmed two new cases of the variant and there are concerns that more people will be infected.
Therefore, there are concerns about how this growth in infections will affect the country’s economy. The only optimism is that the country’s federal and state governments have committed to reopening even as the number of cases rise.
Business groups have also warned about new local and international restrictions. The government will also implement a three-day isolation period for all international arrivals.
Therefore, the new number of cases has led to worries that the Reserve Bank of Australia will sound dovish when it meets next week. Analysts were expecting that the RBA will tweak its policy statement and hint that rates will rise in 2023 instead of the previous 2024.
The next key data to move the AUD/USD will be Australia’s private home approvals and housing credit that will come out on Tuesday. The pair will also react to testimony by Jerome Powell, the Federal Reserve chair.
This will be his first statement since he was reappointed by Joe Biden. Analysts will be waiting for any change in sentiment during this meeting. Also, they will be watching out for any change in tone about the new variant of the virus.
The AUD/USD will also react to the latest pending home sales numbers from the United States. Pending home sales are expected to rise by 1% after falling by 2.3% in the previous month.
The AUD/USD pair has been in a major sell-off in the past few weeks. And last week, the pair managed to move below the key support level at 0.7170, which was the lowest level in October. It has also managed to drop below the 25-day and 15-day moving averages. The Relative Strength Index (RSI) has also been in a bearish trend.
Therefore, the pair will likely keep falling as bears target the key support at 0.7050. On the flip side, a move above 0.7200 will invalidate this view.