Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.6865.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6865.
Add a stop-loss at 0.7100.
The AUD/USD pair rose above a key resistance level on Tuesday as the US dollar softness continued, following the release of another set of weak PMI numbers. It rose to 0.6955, a few points above this week’s low of 0.6867.
US Dollar Retreats After Weak PMI Data
The AUD/USD pair jumped after the ISM and S&P Global published a weak services PMI report. This data showed that activity in the services sector softened a bit last month, even as it remained above the expansion zone of 50.
The global services PMI eased slightly from 51.3 in May to 51.2 in June, missing the expected 51.3. A similar report by ISM showed that the non-manufacturing PMI dropped to 54 from the previous month’s 54.5.
These numbers came a few days after the two agencies published another set of weak manufacturing numbers, a sign that the economy is weakening. Another data released last Thursday showed that the economy created 54k jobs, missing the expected 114k figure. Also, the Bureau of Labor Statistics continued its downward revision for jobs numbers created in May.
These numbers have led to a reduction in the odds that the Federal Reserve will hike interest rates later this year. Odds of a hike have dropped from over 56% last week to 48% today on Polymarket.
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The AUD/USD pair will next react to the upcoming Federal Reserve minutes that comes out on Wednesday this week. These minutes will provide nore hints of what happened in the last meeting and guide investors on what to expect later this year. The pair will also react to statements by several Federal Reserve members like Christopher Waller and John Williams.
AUD/USD Technical Analysis
The AUD/USD pair has been in a downward trend in the past few months, moving from a high of 0.7281 in May to 0.6955. It formed a descending channel whose upper and lower side connected the highest and lowest swings since May this year. It has now moved slightly above the upper side of the channel, though this may be a false breakout.
The pair has retested the 38.2% Fibonacci Retracement level and remains below the 50-day moving average. Therefore, after retesting the upper side of the channel, the pair may resume the downtrend as bears target the lower section. A bullish breakout may see it jump to the key resistance level of 0.7100.
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