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Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6550.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6500 and a take-profit at 0.6550.
- Add a stop-loss at 0.6400.
The AUD/USD sell-off gained steam this week after the relatively mixed economic numbers from the US, China, and Australia. It tumbled to a low of 0.6463, its lowest point since November 10th last year.
Mixed economic data
The AUD/USD pair retreated after the latest Australian wages numbers. According to the statistics agency, Australia’s wages rose by 0.8% in the second quarter, lower than the median estimate of 3.8%.
This increase translated to a YoY gain of 3.6%, also lower than the expected 3.7%. These numbers mean that wage growth has eased in the past few months. As a result, they mean that the Reserve Bank of Australia (RBA) will not be under pressure to resume its rate hikes.
The pair also slumped after another set of weak economic data from China, Australia’s biggest trade partner. In a report, the country’s statistics agency said that retail sales rose by just 2.5% in July, down from the previous 3.1%.
Other numbers signaled that the Chinese economy was doing worse than expected. Industrial production rose by 3.7% while fixed asset investments rose by 3.4%. Worse, the government said that it will stop publishing its youth unemployment rate data.
Most analysts have started to reassess their estimates of China’s economic growth for the year. There are fears that the country will not hit its 5% target estimate.
On the other hand, the US published strong retail sales numbers. The headline retail sales rose by 0.7% in July, higher than the expected 0.4%. Core retail sales rose by 1.0%, signaling that the American consumer is doing well. Therefore, there is a likelihood that the Fed will maintain its rate hikes.
AUD/USD technical analysis
The AUD/USD pair has been in a strong bearish trend in the past few days. This sell-off started when the pair formed a double-top pattern at 0.6890 in June and July. A double-top is usually followed by a bearish breakout. The pair moved below the top’s neckline at 0.6593 and is now at the support at 0.6458 (May 31st low).
The sell-off is being supported by the 25-day and 50-day moving averages while the Relative Strength Index is nearing the oversold level. Therefore, the pair will likely continue falling as they eye the support at 0.6400.
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