Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6100.
- Add a stop-loss at 0.6300.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6100.
The AUD/USD exchange rate has crashed in the past few days, moving to its lowest level since February 3. In the past six days, it has dropped to 0.6200, down over 3.2% from its highest level in February.
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Australian dollar crash continues
The AUD/USD pair has plunged in the past few days as the odds of the Reserve Bank of Australia (RBA) rate cuts rose. This view is supported by the falling Australian bond yields, with the ten-year yield falling to 4.30%, down from the year-to-date high of 4.72%.
Similarly, the 30-year yield dropped from its year-to-date high of 5.17% to 4.85%, its lowest level since February 6. The five-year yield has also fallen from 4.33% to 3.84%.
The odds of the Reserve Bank of Australia’s rate cuts rose after recent economic numbers showed that it was slowing down. This slowdown may continue in the coming days as Donald Trump launches his trade war against key allies and foes.
The AUD/USD pair also retreated as the US dollar index (DXY) bounced back. It rose to $107.56, up from last month’s low of $106.2, as risks rose.
The next key data to watch will be Australia’s retail sales on Tuesday, which will provide information about the state of the economy. Also, the RBA will release minutes of the last meeting, which will show what to expect in the next meetings. The bank slashed interest rates by 0.25% in that meeting.
The AUD/USD pair will also react to the upcoming US manufacturing PMI data. Economists expect the data to reveal that the sector continued to grow.
AUD/USD Technical Analysis
The AUD/USD pair has been in a strong downward trend in the past few days. It dropped from a high of 0.6410, its highest swing in February. It has crashed below the 23.6% Fibonacci Retracement level and the strong, pivot, reverse level.
The two lines of the percentage price oscillator (PPO) have made a bearish crossover. Also, the Relative Strength Index (RSI) has moved downward and slipped below the middle line of 50. Therefore, the pair will likely continue falling as sellers target the key support at 0.6100. A move above the resistance at 0.6290 will invalidate the bearish view.
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