Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7225.
Add a stop-loss at 0.7050.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.7225.
The AUD/USD pair retreated to the 50-day moving average level as investors reacted to the rising US bond yields and the rising odds that the Federal Reserve will hike interest rates in its September meeting. It slipped to 0.7100, its lowest level since August 20th, and 1.80% below the highest point this month.
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Federal Reserve Interest Rate Ahead
The AUD/USD pair has come under pressure in the past few days as the US dollar has rebounded. Data shows that the US Dollar Index (DXY) jumped to 99.7, its highest level since September 2nd.
The US Dollar has jumped even as jitters in the bond market have continued. Data shows that the ten-year yield jumped to a 2007 high of 5.012%. It has jumped sharply from the year-to-date low of 3.92%. Other yields have risen, with the 30-year rising to 5.38%.
The yields have jumped even after last week’s interventions by Treasury Secretary Scott Bessent, who tripled the amount of buybacks. This performance is mostly because of the rising US public debt and the fact that the economy is slowing.
US bond yields have also surged amid rising concerns about soaring oil prices, which analysts warn may get higher soon. Saudi Arabia has been forced to shut its East-West pipeline after it came under attack from Iraqi militias. This means that the world will lose over 7 million barrels a day.
Economists estimate that the Federal Reserve will hike interest rates by 0.25% from between 3.50% and 3.75% to between 3.75% and 4% as inflation remains at an elevated level.
Australian bond yields have also continued to rise. The ten-year yield jumped to 5.40%, its highest level since April 2011 and much higher than the pandemic-low of 0.55%. These numbers mean that the Reserve Bank of Australia (RBA) will decide to hike interest rates again this year.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has slipped in the past few days. It dropped from a high of 0.7237 last week to the current 0.7140. Its lowest level on Monday coincided with the 50-day Exponential Moving Average (EMA). It also coincided with the Major S/R pivot point of the Murrey Math Lines.
The pair has slipped below the ascending trendline that connects the lowest swing since August 3 this year. Therefore, the pair will likely bounce back briefly and then resume the downtrend. The key support and resistance levels to watch will be at 0.7000 and 0.7200.
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