Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.7200.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.7000.
The AUD/USD exchange rate dropped as traders reacted to the latest Australian inflation report, Federal Reserve interest rate decision, and the soaring crude oil prices. It was trading at 0.7123, down from the year-to-date high of 0.7195.
US Dollar Jumps as Risk-Off Sentiment Prevails
The AUD/USD pair retreated slightly after the Australian Bureau of Statistics (ABS) released the latest consumer inflation report, which showed the impact of the ongoing Iran war on prices.
The report showed that the headline Consumer Price Index (CPI) rose from 3.7% in February to 4.6% in March, its highest point since September 2023. This means that the price moved further away from the central bank’s target of between 2% and 3%, which may push it to hike rates again in its meeting next week.
The pair also dropped as crude oil prices continued rising, with Brent, the global benchmark, rising to $119 and the West Texas Intermediate (WTI) rising to $107. These two benchmarks have jumped by 96% and 85% this year, respectively.
The rally continued this week after President Donald Trump announced that he will maintain his blockade against Iran until the country surrenders. Media reports suggest that he may consider a limited attack against Iran to force the government to surrender. An escalation will lead to higher oil prices and inflation, pushing central banks to maintain a hawkish tone.
The Federal Reserve delivered its third interest rates decision of the year, and as was widely expected, officials left interest rates unchanged between 3.50% and 3.75%. Officials maintained a wait-and-see approach as they observed the impact of the ongoing war on the economy.
The next key data to watch on Thursday will be the latest US GDP report, which will provide more information on whether the economy resumed its growth in the first quarter.
AUD/USD Technical Analysis
The daily timeframe chart shows that the AUD/USD pair has pulled back in the past two days. It moved from the year-to-date high of 0.7195 to the current 0.7126.
A closer look shows that it has formed a double-top pattern whose neckline is at 0.6830, its lowest level on March 30th this year. The Average Directional Index (ADX) has dropped to the lowest level since December last year, a sign that the uptrend has stalled.
Therefore, the pair will likely continue falling, potentially to the next key support level at 0.7000. A move above the year-to-date high of 0.7195 will invalidate the bearish outlook.