Bullish View
- Buy the AUD/USD pair and set a take-profit at 0.7200.
- Add a stop-loss at 0.7080.
- Timeline: 1-2 days.
Bearish View
- Set a sell-stop at 0.7120 and a take-profit at 0.7050.
- Add a stop-loss at 0.7220.
The AUD/USD pair was in a tight range after the strong American producer inflation data and after optimism about Ukraine. It is trading at 0.7140, which is a few points above this week’s low of 0.7087.
Risk-On Sentiment
The AUD/USD pair tilted higher as investors embraced a risk-on sentiment in the market after Russia started pulling troops from its border with Ukraine. The move was seen as the start of the de-escalation process.
However, it is too early to tell considering that Russia has more than 100k troops close to the border and in the Baltic sea.
Still, signs of de-escalation were enough to lead to a risk-on sentiment in the market. The US Dollar Index and gold declined while stocks rose sharply.
The AUD/USD pair even after the US published strong producer inflation data. The numbers revealed that the country’s headline PPI remained at an elevated level. It rose by 9.7% in January after rising by 9.8% in the previous month. The core PPI rose by 8.3%. These numbers reinforced the view that the Fed will sound more hawkish in the coming meetings.
Later today, the main catalyst for the pair will be the latest US retail sales numbers. Economists expect that sales did well in December after they dropped in the previous month. Precisely, they see the headline sales rising by 2.0% in January after crashing by 1.9% in the previous month. They also expect that the core sales rose by 0.8% in January.
If analysts are accurate, these will be strong numbers considering that prices remain strong. Last week, data by the Bureau of Labor Statistics (BLS) showed that the headline inflation rose to a 40-year high of 7.5%.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a narrow range in the past few days. The pair is trading at 0.7142, where it has been in the past few hours. As a result, the pair is along the 25-day and 50-day moving averages.
A closer look shows that the pair has formed an inverted head and shoulders pattern, which is usually a bullish sign. The current price is also at the lowest level since January 7th. Therefore, the pair will likely keep rising as bulls target the key resistance level at about 0.7200.
