Bullish view
Bearish view
- Set a sell-stop at 0.6980 and a take-profit at 0.6900.
- Set a take-profit at 0.7065.
The forex market has recently been characterized by an extremely weak US dollar, which has dropped against most developed country currencies, including the Aussie. The AUD/USD price continued its comeback as it rose to a high of 0.7040, the highest point since January 18.
US dollar weakness
The Australian dollar has risen because of three main reasons. First, like other currencies, it has jumped because of the extremely weak US dollar. This happened amid rising optimism that the Fed will not be as hawkish as it was in 2022, when it boosted rates by 450 basis points. It also ended its quantitative easing program that was adding $120 billion of liquidity to the market.
Second, the AUD/USD pair has risen because of the actions by the Chinese government to end its Covid-Zero strategy. Economists expect that the Chinese economy will recover by about 5% in 2023 after rising by 3% in 2022. China is an important country for Australia because of the vast amount of trade that the two countries do.
Finally, it has risen because of the improved business relationships between China and Australia. In January, China announced that it will start allowing Australian coal and other products. Therefore, this means that demand for the Aussie will rise as trade relationships recover.
There will be two important numbers to watch this week. The Australian statistics agency will publish the latest consumer price index (CPI) data on Wednesday. Economists expect that the country’s inflation remained above 7% in the fourth quarter.
On the following day, the US will publish the first estimate of the fourth quarter GDP data. Economists expect the data to show that the economy rose by 2.6% in Q4 after growing by 3.2% in Q3. The US will also publish the latest durable goods order numbers.
AUD/USD prediction
The Australian dollar has been in a strong upward trend for months. On the 2H chart, it has formed a widening wedge that is shown in yellow. Most recently, it seems like it is about to form a double-top pattern at 0.7064. In price action analysis, a rising broadening wedge and a double-top are bearish signs. The MACD has moved above the neutral level.
Therefore, there is still some more upside ahead of the upcoming Australian inflation numbers. This recovery could see it rise to 0.7065 followed by the upper side of the wedge at 0.7115.
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