Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6400.
- Add a stop-loss at 0.6250.
- Timeline: 1-2 days.
Bearish view
- Set a sell stop at 0.6285 and a take-profit at 0.6200.
- Add a stop-loss at 0.6400.
The AUD/USD exchange rate moved sideways even as the US dollar index (DXY) plunged to the lowest swing in months. It was trading at the psychological point at 0.6300, up slightly from this month’s low of 0.6200. It has underperformed other currency pairs like the GBP/USD and EUR/USD.
US dollar index crash continues
The AUD/USD pair rose slightly as the US dollar index crash gained steam. The index, which measures the performance of the US dollar against other currencies, plunged to a low of $103.50, its lowest level since November last year.
This crash is because of the ongoing trade war between the United States and other countries. Trump has implemented a 25% tariff on goods from Mexico, Canada, and China.
He also imposed a 25% tariff on all imported steel and aluminum, a move meant to boost manufacturing jobs in the country.
Trump has also pledged to impose reciprocal tariffs on imports from most countries, including Australia. Australia will only be hurt because of the steel and aluminium tariffs and will be less affected on reciprocal ones because it applies few to no tariffs on US goods.
These tariffs have led to a sharp crash of the US dollar index as investors anticipate that the Federal Reserve would slash interest rates more times than expected this year.
These odds rose after the US published soft jobs numbers last week. A report by ADP showed that the private sector created just 77k jobs in February. Another one by the Bureau of Labor Statistics (BLS) showed that the economy added 151k jobs, while the unemployment rate rose to 4.1%.
There will be no major economic data from Australia. Instead, traders will focus on the upcoming US consumer inflation data scheduled on March 12.
AUD/USD technical analysis
The AUD/USD pair has held steady in the past few days. It was trading at 0.6300 on Monday morning, a few points above the 50-day and 100-day Exponential Moving Averages (EMA).
The pair has moved slightly above the 23.6% Fibonacci Retracement level at 0.6280 and this month’s low of 0.6188. It has also made a series of higher highs and higher lows, forming an ascending channel.
Therefore, the AUD/USD pair will likely continue rising as bulls target the next psychological point at 0.6400. A drop to 0.6250 is still possible since the pair has formed a small doji candlestick pattern.