Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.7315.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7315.
Add a stop-loss at 0.7100.
The AUD/USD exchange rate continued rising, and is now hovering at its highest point since May 15 this year. It was trading at 0.7218 as traders reacted to the rising oil prices and the upcoming US inflation data, which will help the Federal Reserve when making its interest rate decision next week.
Australian Dollar Rally Loses Momentum
While the Australian dollar has continued rising, there are signs that it is losing momentum as investors move to the safety of the US dollar amid the elevated risks.
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These risks continued overnight when the US and Iran continued their attacks. The US started these attacks by hitting Iranian tankers near Kharg Island. In response, Iran launched attacks on key assets, a sign that the IRGC are not ready to capitulate.
As a result, crude oil prices jumped, with Brent, the global benchmark, jumped to $100 a barrel. Gasoline and diesel prices continued rising, with the latter being at the highest level on record. Higher diesel prices are important because of the role of trucks in the economy.
There is no major macro data from Australia this week. Therefore, in addition to the US-Iran war, traders will focus on the upcoming US inflation report, which will come out on Thursday and Friday.
These numbers are important because they come a few days after the US released the latest jobs report. According to the BLS, the economy created 162k jobs last month, while the unemployment rate remained at 4.1%.
As such, a higher-than-expected inflation report will push the Federal Reserve to hike interest rates. Already, odds that the Fed will hike interest rates have jumped to over 50% on Polymarket.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD pair has been in a steady uptrend in the past few weeks, making the Australian dollar one of the best-performing currencies. This uptrend has brought it above the 50-day moving average.
However, there are signs that the momentum is fading as it nears the key resistance at 0.7270, its highest level in June. Also, the pair has formed a rising wedge pattern, which is made up of two ascending and converging trendlines.
Therefore, the pair will likely have a strong bearish breakout in the coming days, potentially to the key support level of 0.7100.
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