Bullish view
- Buy the AUD/USD pair and set a take-profit at 0.6600.
- Add a stop-loss at 0.6375.
- Timeline: 1-2 days.
Bearish view
- Sell the AUD/USD pair and take-profit at 0.6375.
- Add a stop-loss at 0.6600.
The AUD/USD exchange rate bounced back as the US dollar index retreated as geopolitical risks eased and US published weak consumer confidence data. It rose to the psychological point of 0.6500, up by 2% above the lowest point this week.
Risk-on sentiment prevails
The AUD/USD pair bounced back after Donald Trump brokered a ceasefire between Iran and Israel following days of hostilities. This truce is showing signs of holding as the two sides have not launched any missiles.
As a result, the price of crude oil has slumped and investors have embraced a risk-on sentiment, with the Dow Jones, Nasdaq 100, and S&P 500 indices jumping by over 1% on Tuesday.
The rally also happened after the US published weak consumer confidence data, raising concerns that the economy may contract again. A report by the Conference Board showed that consumer confidence dropped by 5.3 points to 93 on Tuesday, lower than what analysts were expecting.
Falling consumer confidence means that many of them are holding off major purchases as they wait for the final decision on tariffs. Trump’s deadline on tariffs from most countries will come in July.
Consumers are also concerned about the labor market, with the share of those saying that jobs were plentiful falling to 29.2%, the smallest level in over four years.
The AUD/USD pair also reacted to Jerome Powell’s statement. In a testimony to Congress, he reiterated the Fed’s view that it will wait-and-see the impact of Trump’s tariffs on the inflation.
His statement was defiance from what Donald Trump has requested. In several Truth Social posts, Trump has pushed the bank to cut interest rates by a full point, noting that there was no inflation.
Two Fed officials, Michele Bowman and Christopher Waller, have said that they will support a rate cut in the upcoming meeting.
AUD/USD technical analysis
The daily chart shows that the AUD/USD exchange rate dropped to 0.6375 on Monday as geopolitical risks rose. It then bounced back by 2% to the psychological point at 0.6500. It has formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other. Also, the pair formed a hammer candlestick pattern.
The pair has moved inside the ascending channel, while the Relative Strength Index has pointed upwards. It has also jumped above the 50% Fibonacci Retracement level. Therefore, the pair will likely continue rising as bulls target the resistance at 0.6600.
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Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.
