At the beginning of the week, the dollar index found support amid geopolitical instability. Moreover, the chances of interest rates hikes by the Federal Reserve System (Fed) this year contribute to the growth of the U.S. currency.
Last week, Fed Chairman Jerome Powell addressed Congress. He warned of possible further interest rate hikes, but noted that the Fed would act carefully. Some other members of the Fed supported his statement.
Currently, market participants estimate the probability of the next stage of the U.S. monetary policy tightening in July at 72%. Rates are expected to decrease only in 2024.
Australia's main trading partner is ready for the new stimulus. China is back from the holiday weekend, which makes market participants interested in additional measures of support from the Beijing authorities.
Meanwhile, S&P Global downgraded China's GDP growth forecast for the current year. This happened after the publication of May economic data in the country.
According to the updated estimate by the company, China's GDP growth this year will be 5.2% against the previously estimated 5.5%. The country's economic recovery will continue, but it will be uneven, with investment and industry lagging behind.
S&P Global is the first major international credit agency to lower its forecast for China's economy this year. By now, only a few major banks, including Goldman Sachs, have revised their estimates. Expectations of lower GDP growth in China could lead to lower demand for the Australian dollar.
Australia's inflation figures are expected to be published this week. The Australian monetary policy for the coming month will depend on their actual values.
The AUDUSD pair is forming a downtrend on the H1 timeframe.
In terms of wave analysis, the price of the pair is in the third descending wave, which materialized completely. A pullback to a quadruple rising wave is quite likely, due to the lack of strong fundamentals at the beginning of the week.
In any case, at the stage of down trend formation it is better to consider selling deals.
The short-term prospects for the AUDUSD pair are to sell around the level of 0.6715.
The target is at the level of 0.6630.
Part of the profit should be fixed near the level of 0.6670.
The stop-loss is at the level of 0.6760.
"Bearish" trend has a short-term character, so the volume of trade should not exceed 2% of your balance.