Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Set a stop-loss at 0.6350.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6350.
- Add a stop-loss at 0.6500.
The AUD/USD exchange dropped to an important support level, helped by the strong US dollar and the rising risk-off sentiment among investors. It dropped to a low of 0.6422, its lowest level since July 31, and 3%below the highest level in July.
Risk-Off Sentiment Continues
The AUD/USD pair continued its downtrend this week as market participants embraced a risk-off sentiment ahead of the closely-watched Jerome Powell speech at the Jackson Hole Symposium in Wyoming
Jackson Hole is an annual event in which many policymakers gather to discuss the global economy and make predictions about monetary policy.
While many officials talk, the main focus is usually on the Federal Reserve chair, who delivers his speech and delivers a forecast on monetary policy.
This meeting will be important because it comes after the US published mixed economic numbers that pointed to resilient inflation and deteriorating labor market. Inflation rose to 2.7%, while core inflation, which excludes the volatile food and energy prices, rose to 3.1%. The producer price index jumped to 3.6% during the mo.
Therefore, his statement will likely provide guidance on the upcoming meeting in September. Economists believe that the bank will cut interest rates by 0.25% in this meeting. If this happens, it will be the first time this year that it has slashed rates.
The Fed has come under intense pressure from Donald Trump, who has called for rates to be cut, potentially to 1%. Trump believes that the high rates are hurting the economy by boosting the interest the government pays.
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He also believes that high rates are slowing the economy by making it difficult for people to buy houses because of the higher mortgage rates.
The key economic data to watch today will be the flash manufacturing and services PMI data from the United States and the Philadelphia Fed manufacturing index.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair pulled back to the important support level at 0.6422 as the US dollar strengthened.
It has moved below the 50-day Exponential Moving Average (EMA) and the lower side of the ascending channel that has formed in the past few months.
On the positive side, it has formed a small double bottom pattern whose neckline is at 0.6562. Therefore, this pattern could lead to a brief pullback ahead of Powell’s speech.
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