Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6250.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 0.6285 and a take-profit at 0.6200.
- Add a stop-loss at 0.6400.
The AUD/USD exchange rate wavered as the market reacted to various trade-related events from the United States. The pair was trading at 0.6297 on Wednesday morning, a few points below this month’s high of 0.6365.
US inflation data ahead
The AUD/USD pair retreated after Donald Trump escalated the trade war between the US and Canada. He announced that the country would impose a 50% tariff on aluminium imported from Canada and hinted that more would come.
His latest tariff news are a reaction to the decision by Ottawa to hike prices of electricity supplied to the United States by 25%. The state’s governor, Doug Ford, insisted that he did not want to hike prices, but was pushed by the Trump administration.
These tariffs threatens to harm the Canadian and American companies operating across the two countries. For one, American companies own the aluminium firms operating in the Canadian side.
The AUD/USD exchange rate wavered ahead of the upcoming US consumer inflation data. According to Investing, analysts expect the data to show that the headline consumer inflation eased slightly in February.
The headline inflation is expected to come in at 2.9%, down from 3.0%, while the core CPI is expected to move from 3.3% to 3.2%. While this decline will be a good thing, the numbers will not be a good representation of what is happening in the US as they will not include Donald Trump’s tariffs.
Trump’s tariffs will put the Fed in a difficult place because they will trigger stagflation in the US. Stagflation is a period of slow economic growth and high inflation, and is the most difficult situation for the Fed to manage.
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AUD/USD technical analysis
The AUD/USD exchange rate wavered as tensions in the United States rose. It was trading at 0.6300, a few points below last week’s high of 0.6365.
The pair has remained slightly above the 23.6% Fibonacci Retracement level and is hovering at the 50-day and 25-day moving averages.
Further, it has formed a megaphone pattern, which is made up of two ascending and diverging trendlines. Therefore, the pair will likely keep rising as bulls target the next key resistance at 0.6365, its highest level last week, followed by the psychological point at 0.6400. A drop below the support at 0.6262 will invalidate the bullish view.
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