Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6500.
- Add a stop-loss at 0.6250.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6250.
- Add a stop-loss at 0.6500.
The Australian dollar dropped even after the US and China made some progress on the ongoing trade conflict. The AUD/USD exchange rate dropped to 0.6367 on Tuesday morning, down from last month’s high of 0.6515.
US Dollar Surge Continues
There are signs that the US dollar has bottomed after it crashed to a multi-year low following Donald Trump’s Liberation Day speech on tariffs. The dollar index, which tracks the greenback against a basket of currencies, jumped from last month’s low of $97 to $101.4 today. This happened as the currency jumped against most developed world currencies.
The main news so far this week is that the US agreed to lower tariffs on Chinese goods to 30%, while China lowered its levies on US goods to 10%. This was a big victory to Xi Jinping as the US backed down.
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The deal was also a victory for Australia, a country that does most of its business with China. That is a sign that its products, like iron ore, steel, and aluminium, will continue to have robust demand in China.
There are also signs that the US will reach more trade deals in the coming weeks. Officials have started talking with the European Union, and last week, the country reached a deal with the United Kingdom.
There will be no major economic data from Australia on Tuesday. Instead, the main data will come from the United States, where the statistics agency will publish the latest consumer inflation data.
Economists expect the data to show that the US inflation rose slightly, a trend they expect to continue in the coming months because of US tariffs. Higher inflation means that the Federal Reserve will likely not cut interest rates soon.
AUD/USD technical analysis
The daily chart shows that the AUD/USD pair has pulled back in the past few weeks, moving from 0.6510 to 0.6370, its lowest point since April 30. It has dropped below the 50% Fibonacci Retracement level. It also moved below the 25-day moving average, while the two lines of the MACD have formed a bearish crossover pattern.
The pair is approaching the lower side of the ascending channel. It has also formed an inverse head and shoulders pattern. Therefore, the pair will likely drop further a bit, and then bounce back in the coming days. It will likely end the week at 0.6500.
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