Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- 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 0.6300.
The AUD/USD exchange rate pulled back to its lowest level since May 13 as traders focused on the ongoing geopolitical events. It retreated to a low of 0.6370 on Tuesday morning, down from this month’s high of 0.6550.
Geopolitics and Jerome Powell Statement
The AUD/USD pair retreated as investors ran to the US dollar index’s safety as geopolitical risks rose and crude oil prices surged. Iran attacked an American base in Qatar in response to the recent attack by the US across three nuclear sites in its country.
The AUD/USD pair also reacted mildly to the flash manufacturing and services PMI numbers from the US and Australia. Data shows that the Australian manufacturing PMI remained unchanged at 51, while the services PMI figure rose from 50.6 in May to 51.3 in June.
In the US, the manufacturing PMI figure remained unchanged at 52, while the services number fell slightly to 53.1. A PMI figure of 50 and above is a sign that an industry is growing.
The AUD/USD reacted to another dovish statement from a key Federal Reserve official. In a statement, Michele Bowman, the Vice Chair for supervision said that she supported an interest rate cut in its July meeting, saying that the US was on track to hit its 2% inflation target.
Her statement mirrored that of Christopher Waller, who said that he supported a cut in the July meeting. Therefore, all eyes will be on Jerome Powell, the Fed Chair, who will testify before Congress on Tuesday and Wednesday.
The other top catalyst for the pair will be statements by other Fed officials like Beth Hammack and John Williams. The Conference Board will publish the latest consumer confidence report, which provides hints on spending, the biggest component of the US economy.
AUD/USD technical analysis
The AUD/USD exchange rate dived as geopolitical events rose and then bounced back. It dropped to a low of 0.6371 to 0.6450. The 12-hour chart shows that it has formed a bullish engulfing pattern, a popular reversal candlestick pattern.
It has moved slightly above the 50% Fibonacci Retracement level and inside the horizontal channel.
The pair remains below the 50-period moving average and the lower side of the rising wedge pattern. Therefore, the AUD/USD’s will likely rise and retest the lower side of the wedge at 0.6500 and then resume the downtrend because of the rising wedge pattern.
Ready to trade our daily Forex signals? Here’s a list of some of the best Forex platforms in Australia to check out
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.
