Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6750.
Add a stop-loss at 0.7000.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.6750.
The AUD/USD pair continued its strong downward trend this week, reaching its lowest level since January 23. It has dropped in the last four consecutive days and is down by 4.3% from the year-to-date high.
RBA Minutes and US Consumer Confidence Report
The AUD/USD exchange rate continued falling this week as the US Dollar Index (DXY) rebounded amid the escalating crisis in the Middle East, where US troops started to arrive.
There are signs that the Iran war will continue for longer than initially expected, which will lead to higher energy prices and inflation. Crude oil and natural gas prices have continued rising in the past few weeks.
The next important AUD/USD news will be the upcoming Reserve Bank of Australia (RBA) minutes, which will come out on Tuesday this week. These minutes will provide more color on the last meeting when the bank decided to hike interest rates for the second consecutive meeting.
There are fears that the bank will continue hiking interest rates in the coming meetings as inflation will likely continue rising in the foreseeable future.
The other main AUD/USD news will be the upcoming US consumer confidence report on Tuesday. Economists expect the upcoming report to show that consumer confidence dropped sharply this month as mortgage rates and inflation rose.
Data shows that the average 30-year mortgage rate has jumped to 6.38%, its highest level in months. Also, gasoline and diesel prices have continued rising, while the labor market has stagnated, with the economy shedding over 92k jobs in February. A report coming out on Friday is expected to show that the unemployment rate rose to 4.5% in March.
AUD/USD Technical Analysis
The daily chart shows that the AUD/USD exchange rate dropped from a high of 0.7180 earlier this month to the current 0.5873.
It has moved below the psychological level at 0.7000. Also, the pair dropped below the key support level at 0.6921, its lowest level on February 4.
It has moved below the 50-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) has slumped from the extreme overbought level of 85 on June 29 to the current 37.
The pair has already invalidated the bullish flag pattern, a popular continuation sign in technical analysis.
Therefore, the pair will likely continue falling this week as demand for the US dollar rises. Such a move will likely push it to the key support level at 0.6750.