Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6800.
Add a stop-loss at 0.7000.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.6800.
The AUD/USD exchange rate remained in a narrow range on Tuesday after some key economic numbers from Australia. It rose to 0.6920, up slightly from this month's low of 0.6830.
Australian Economy Impacted by Iran War
The AUD/USD pair moved sideways as investors reacted to the latest Australian macro data. According to S&P Global, the country's services PMI dropped to 46.6 in March from the previous 52.8.
The composite PMI dropped from 52.4 to 47, a sign that the country is being impacted by the ongoing war, with inflation continuing to rise.
More data showed that Australia's household spending also dropped in February this year, a trend that may continue as interest rates rise. Household spending dropped from 4.6% YoY in January to 4.2% in February.
The AUD/USD pair wavered ahead of the upcoming US durable goods orders. Economists expect the upcoming data to show that durable goods orders dropped from 0% in January to minus 0.5%.
The Federal Reserve will publish the latest minutes of the last meeting on Wednesday. These minutes will provide more information about the last meeting in which officials decided to leave interest rates between 3.50% and 3.75%.
Economists now expect the bank to maintain interest rates unchanged this year as inflation continues rising. An upcoming report is expected to show that the headline Consumer Price Index (CPI) rose to 3.4% in March, higher the bank's target of 2.0%.
The US will also publish more data this week, including that upcoming GDP and PCE reports on Thursday. Economists see the Bureau of Economic Analysis data to show that the economy expanded by 0.7% in the fourth quarter, a sharp deceleration from the previous 4.4%.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair has dropped sharply from the year-to-date high of 0.7185 in January to 0.6917, which is slightly above the 23.6% Fibonacci Retracement level. This retracement was drawn by connecting the highest and lowest levels since April last year.
It has dropped below the 50-day Exponential Moving Average (EMA), while the Percentage Price Oscillator (PPO) has moved below the zero line.
Therefore, the pair will likely continue falling in the near term, potentially to the key support level at 0.6800. A move above the key resistance level at 0.700 will invalidate the bearish outlook.