Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6650.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6650.
- Add a stop-loss at 0.6500.
The AUD/USD exchange rate jumped above a crucial resistance level as the greenback sell-off gained steam. It rose to a high of 0.6580, its highest level since November last year. It has jumped by over 11% from its lowest point this year.
US Dollar Index Crash Continues
The AUD/USD pair continued its strong surge this week as the US dollar crash accelerated amid a risk-on sentiment. This sentiment continued after the US restarted its trade talks with Canada.
Canada agreed to halt the introduction of a new tax on the technology sector after Trump threatened steep tariffs. Therefore, there are hope that the two countries will reach a trade agreement.
Traders also hope that the US will ink a deal with other countries, including Australia. It has already sealed a deal with countries like China, a top Australian trade partner.
The AUD/USD pair also rose as investors predicted that the Federal Reserve would start cutting interest rates soon. Polymarket traders anticipate that the bank will start its cuts in its September meeting.
The view is based on the feeling that Donald Trump’s tariffs are not having a major impact on inflation. Data released last month showed that the headline consumer inflation rose slightly in May.
The next key catalyst for the AUD/USD pair will be the upcoming statement by Jerome Powell, the Fed Chair. He is expected to maintain his view that the bank will maintain interest rates unchanged as it observes the impact of tariffs.
The AUD/USD pair will also react to the upcoming US manufacturing PMI and JOLTs job openings data. These numbers will provide more information about the state of the US economy under Trump’s tariffs.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate has been in a strong bull run in the past few months. It jumped from a low of 0.5915 in January to the current 0.6580.
The pair has remained above the 50-day and 100-day Exponential Moving Averages (EMA). It has also jumped above the important resistance level at 0.6555, the 61.8% retracement level.
The pair has retested the upper side of the ascending channel, while the Relative Strength Index (RSI) has crossed the neutral point at 50. Therefore, the pair may resume the downtrend and possibly retest the support at 0.6500.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.