Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7275.
Add a stop-loss at 0.7100.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.7275.
The AUD/USD pair held steady above a crucial support level and has formed some bullish technicals pointing to further gains. The Aussie was trading at 0.7185 on Monday, a few points above last month’s low of 0.7080.
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Australian Dollar Jumps Amid Risk-On Sentiment
The AUD/USD pair held relatively steady as investors embraced a risk-on sentiment amid progress on Iran. This hope has pushed crude oil prices downwards, with Brent and the West Texas Intermediate (WTI) falling to $89, and the West Texas Intermediate (WTI) moving to $86.
The falling oil prices have led to lower bond yields in Australia and the US. For example, the ten-year Australian bond yields plunged to 4.85% from the year-to-date high of 5.182%. Similarly, the ten-year yield dropped to 4.43% from the year-to-date high of 4.686%. It has dropped to the lowest level since May 12.
The performance of the bond market is a sign that investors expect inflation to cool down in the coming years. There are signs that inflation is slipping, with a report released last week showing that Australia’s CPI rose by less than expected in April. This retreat happened as the government slashed taxes on fuel. The CPI dropped from 4.6% in March to 4.2%.
The next main catalyst for the AUD/USD pair to watch will be key macro data from the United States and Iran. The most important data will be the US jobs report, which will provide more information on the state of the economy amid the ongoing war. Economists expect the report to reveal that the labor market did well in May as it added over 93k jobs.
The AUD/USD pair will also react to the upcoming Australia exports and imports data and a speech by Michelle Bullock on Thursday.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has remained above the ascending trendline that links its lowest points in February and March, and in May. That is a sign that the pair is struggling to move below that level.
The pair has also formed an inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. It has moved above the 50-day Exponential Moving Average (EMA).
Therefore, the price will likely continue rising as bulls target the year-to-date high of 0.7275. A move below the ascending trendline will invalidate the bullish outlook.
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