AUDUSD is gradually recovering after a powerful decline in the second half of June. The collapse has stopped, but so far quotes have regained only a small part of losses. Further price recovery is actively hindered by the resistance level of 0.67. Locally, neither the Australian nor the U.S. dollar has a clear advantage, so AUDUSD is likely to continue to rebound from the 0.67 level.
Today, the Australian currency was hoping to get support from consumer and business confidence statistics. The data did reflect an improvement in sentiment in June compared to May. However, the positive dynamics of economic indicators was quite expected by market participants, and therefore the reaction of the Australian dollar was insignificant.
Important statistics on the U.S. economy will be released tomorrow. Moreover, the beginning of the week turned out to be rather weak for the U.S. currency. Market participants preferred to ignore the statements of the Fed representatives, suggesting several more interest rate hikes. However, the gradual comprehension of the still hawkish position of the American officials may very quickly restore the increased demand for the dollar.
Federal Reserve Bank of Cleveland President Loretta Mester, along with her San Francisco Fed counterpart Mary Daly, said at least two more rate hikes of 0.25% are needed this year. Daly said the risks of taking too little action to curb inflation continue to outweigh the risks of too much action. The San Francisco Federal Reserve Bank head says she is starting to see signs of a slowing economy, but they are still not enough.
Federal Reserve Bank of New York President John Williams considers the current unemployment rate of 3.6% to be too low for inflation to return to the 2% target. Therefore, it is necessary to further tighten monetary policy, causing unemployment to rise to the 4-4.5% range. Until then, it is not expected to move into a rate cut cycle, so support for the dollar will remain.
AUDUSD pullback from 0.67 resistance could lead the price to the level of 0.663. If the price breaks through the level of 0.672, the scenario will be canceled.
Consider the following trading strategy:
Sell AUDUSD in the range of 0.667-0.67. Take profit – 0.663. Stop loss – 0.672.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion