Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.6950.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6950.
Add a stop-loss at 0.7200.
The AUD/USD pair remained in a narrow range this week as the war in the Middle East. It was trading at 0.7077 on Tuesday, down slightly from the year-to-date high of 0.7147. Focus will remain on the new developments in the Middle East, upcoming US jobs data, and Australian GDP report.
Geopolitics, US Jobs, and Australian Jobs Data
The AUD/USD pair wavered as investors assessed the developments in the Middle East, where war broke out during the weekend. In the aftermath, crude oil and gas prices continued rising, a move that may lead to higher inflation.
Brent and West Texas Intermediate (WTI) jumped to $78 and $73, respectively, a trend that may continue as Iran has shut down the Strait of Hormuz. Natural gas prices continued rising after Qatar closed a major plant.
The next important catalyst for the AUD/USD pair will be the upcoming Australian GDP report. Economists polled by Reuters expect the upcoming report to show that the services PMI rose from 52.2 in January from 56.3 in February this year. The composite PMI is expected to come in at 52 to 55.7.
The other key data to watch will the fourth quarter GDP report. Economists expect the data to show that the economy expanded by 2.5% in Q4. A higher GDP figure, together with the recent inflation data, will raise the possibility of another interest rate hike.
The AUD/USD pair will also react to the upcoming Australian jobs numbers. ADP will release its numbers on Wednesday, while the Bureau of Labor Statistics (BLS) will release its report on Friday. These numbers will help the Federal Reserve when delivering its decision later this month.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate was trading at 0.7085, a few points below the year-to-date high of 0.7145. The pair has remained above the Supertrend indicator.
It has also formed a bullish flag pattern, which is made up of a vertical line and a channel. Therefore, the pair will likely have a strong bullish breakout in the coming days.
A bullish breakout will point to more gains, potentially to the year-to-date high of 0.7145. A move above that level will point to more gains, potentially to the psychological level at 0.7200.