This week, the AUDUSD currency pair tested the resistance of 0.678 again. Quotes have not been able to stay above this level for more than two and a half months. The recent attempt to break it up was also unsuccessful, and yesterday's trading ended with the biggest drop in price over the last month. Quotes rolled back to the middle of the 0.664-0.678 medium-term range and now they are likely to move to its lower boundary
Yesterday's AUDUSD fall was in line with the general strengthening of the dollar against riskier currencies. It is significant that the negative statistics on industrial inflation and unemployment benefit claims in the U.S. had almost no effect on the intention of market participants to purchase bonds denominated in the U.S. currency. The status of the dollar as a safe haven asset was more important than the negative macroeconomic data.
The dynamics of the Australian dollar will significantly depend on the results of the country's Trade Minister first visit to China since 2019. Relations between Australia and China have worsened considerably in recent years, and now there is an attempt to normalize trade relations. However, considering not the most positive data on the Chinese economy, formal agreements between officials are unlikely to lead to a significant strengthening of the Australian currency.
Meanwhile, Fed officials continue to highlight the need of maintaining tight monetary policy. Although additional interest rate hikes are no longer expected, the U.S. regulator is not in a hurry to move to lower interest rates. Yesterday's comments by the head of the Minneapolis Federal Reserve Bank, Neel Kashkari, as well as today's statements by his colleague Michelle Bowman clearly do not match market forecasts of a 0.75% interest rate cut by the end of the year. In this regard, a significant weakening of the dollar should not be expected.
On the daily AUDUSD chart, the Stochastic indicator has formed a sell signal, which increases the probability of a further drop in prices. The downside target is the level of 0.664, and if it is surpassed, the sellers might direct the price to 0.66. The growth scenario will be relevant in case of a return to the level above 0.675.
The following trading strategy option can be suggested:
Sell AUDUSD in the range of 0.669-0.671. Take profit – 0.664. Stop loss – 0.675.
This content is for informational purposes only and is not intended to be investing advice.
