Bearish View
- Sell the AUD/USD pair and set a take-profit at 0.6375.
- Add a stop-loss at 0.6600.
- Timeline: 1-2 days.
Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6375.
The AUD/USD pair is stuck in a tight range this week, likely because there are no major market-moving events from the United States and Australia. It was trading at 0.6472 on Wednesday, where it has remained in the past two days.
Australian Economy is Recovering
The AUD/USD pair wavered after a report by S&P Global said that the Australian economy was doing well. The data revealed that the services PMI rose from 51.8 in June to 54.1, a sign that the sector is expanding.
Another data point showed that the composite PMI rose from 51.6 in June to 53.8 last month. A PMI figure of 50 and above signals that a sector is growing.
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More data showed that Australia’s household spending rose from 4.4% in May to 4.8% in June. This is an important report because consumer spending is a key part of the Australian economy.
The AUD/USD pair also reacted mildly to the latest US trade and PMI numbers. US exports dropped to $277 billion in June, while imports fell to $337 billion. Consequently, the trade deficit narrowed to $60.2 billion. These numbers are early indicators that Trump’s tariffs were having an impact on the economy.
A separate report revealed that the ISM services PMI eased slightly to 50.1, while the one by S&P Global revealed that the figure rose to 55.7.
There will be no important macroeconomic data from the US and Australia, meaning that the pair will likely remain in a tight range. Traders will continue watching any potential trade deal between the United States and China.
The pair will also react to statements on the Federal Reserve. For example, in a note on Tuesday, Goldman Sachs analysts estimated that the Fed would slash rates in September.
AUD/USD Technical Analysis
The 12-hour chart shows that the AUD/USD exchange rate has pulled back in the past few days. It moved from a high of 0.6621 on July 24 to 0.6472.
The pair has dropped below the 50-period Exponential Moving Average (EMA), a sign that bears are in control. It has moved below the lower side of the ascending channel.
There are signs that the AUD/USD pair has formed a bearish pennant pattern. Therefore, the pair will likely have a bearish breakdown, with the next point to watch being at 0.6375, its lowest point on June 23.
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