Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6865.
Add a stop-loss at 0.7100.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.6865.
The AUD/USD pair retreated as market participants reacted to the rising geopolitical tensions in the Middle East. It retreated to 0.6980, a few points below this month’s high of 0.7020 as focus to key macro data from the United States and Australia.
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Australia Jobs Data and Rising Geopolitical Tensions
The AUD/USD pair pulled back as geopolitical tensions in the Middle East escalated. The US and Iran continued their tit-for-tat attacks during the weekend, with tens of people being killed.
As a result, crude oil prices continued rising, with Brent crossing the important resistance level of $90 on Monday morning. The West Texas Intermediate (WTI) also continued rising. As a result, there is a risk that inflation in the US and Australia will continue rising in the coming weeks.
Data shows that gasoline prices have started going back up in the United States and are nearing the crucial level of $4. Last month, gasoline was trading at $3.87, and was a main contributor to falling inflation in the US.
Data released last week showed that the headline Consumer Price Index (CPI) dropped from 4.2% in May to 3.5% in June. Wholesale prices also resumed their downward trend during the month.
Looking forward, there will be no major macro data from the United States this week. Instead, traders will focus on the geopolitical situation between the US and Iran, and the upcoming Australian macro data.
Economists expect the upcoming report to show that Australia’s unemployment rate remained at 4.4% in June. They also expect the data to show that the economy created 15.2k jobs in June after creating 40.3k jobs in the previous month.
These numbers will help the Reserve Bank of Australia (RBA) when deciding its monetary policy decision later this month.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has pulled back in the past two straight days. It has formed an ascending channel, which is part of the bearish flag pattern, a common continuation sign.
The pair has remained below the 50-day Exponential Moving Average (EMA) and the 23.6% Fibonacci Retracement level. Also, the Relative Strength Index (RSI) has turned around and is about to cross the neutral point of 50.
Therefore, the pair will likely continue falling, potentially to the psychological level of 0.6865, its lowest level this month.
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