Bearish view
Sell the AUD/USD pair and set a take-profit at 0.6850.
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 0.6850.
The AUD/USD pair pulled back as investors embraced a risk-off sentiment after the recent Samsung earnings and as crude oil prices rose modestly. It retreated to 0.6925, a few pips below this week’s high of 0.6960 ahead of the FOMC minutes later today.
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RBA Warns on Inflation and FOMC Minutes
The AUD/USD pair retreated as traders embraced a risk-off sentiment after Samsung’s earnings. While the results showed that its revenue and profit jumped, South Korean and US stocks plunged. The Dow Jones and the Nasdaq 100 indices retreated by over 30 basis points.
The pair also retreated even after the Reserve Bank of Australia (RBA) warned of sticky inflation caused by the surge in data center investment in the country. It believes that the investments may compete with businesses for workers and resources, making it harder to combat inflation.
This competition is happening at a time when the unemployment rate remains at the lowest level in years. Rising wage growth may lead to sticky inflation, pushing the RBA to hike interest rates later this year.
The pair also dropped as energy prices rose after Iran launched attacks against ships in the Strait of Hormuz. In response, the US revoked waiver for Iran to sell its oil, which is a major part of the Memorandum of Understanding (MoU). Also, Ukraine struck the biggest Russian refinery, leading to shortages in the country.
Looking ahead, the Federal Reserve will publish minutes of the last meeting, in which officials left interest rates unchanged. These minutes will provide more information on the deliberations that took place.
The AUD/USD pair will also react to some notable statements from Fed officials like Lorie Logan, John Williams, and Christopher Waller on Thurday. These statements will also provide information on what to expect later this year.
AUD/USD Technical Analysis
The AUD/USD pair has dropped substantially in the past few months, forming a descending channel. It retreated after hitting the upper side of this channel.
At the same time, the 50-day and 100-day moving averages are about to form a bearish crossover, which would point to more downside.
The pair has also formed a bearish flag-like pattern. Therefore, the pair will likely continue falling, potentially to the key support level of 0.6850. This outlook will be invalidated if it rises above the descending channel.
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