Aussie at Risk of Further Sell-Off

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Bearish View

  • Sell the AUD/USD and set a take-profit at 0.7100.
  • Add a stop-loss at 0.7250.
  • Timeline: 1-2 days.

Bullish View

  • Set a buy-stop at 0.7200 and a take-profit at 0.7300.
  • Add a stop-loss at 0.7100.

The AUD/USD pair declined to the bottom stage since January eleventh after weak Australian shopper confidence knowledge. It additionally retreated because the US greenback made a robust comeback as bond yields jumped. It is buying and selling at 0.7180, which is about 2% under the very best stage final week.


Australia Consumer Confidence

Like in most western nations, shopper spending is the largest constituent of the Australian financial system. Therefore, traders and policymakers consistently have a look at shopper confidence knowledge. On Tuesday, knowledge by ANZ Bank confirmed that shopper confidence declined 7.6% final week to about 97.9. This was the bottom it has been since 1992.

The decline in shopper confidence led to a pointy decline in shopper spending. While spending sometimes drops after Christmas, final week’s drop was about 10% decrease than in the latest years.

This decline was attributed to a variety of causes. For one, Australia is seeing a robust wave of Covid-19 that has pressured states to announce some restrictions. Unlike most nations, Australia has nonetheless closed its borders with most nations.

Still, analysts at Commonwealth Bank imagine that the Reserve Bank of Australia (RBA) will begin to normalize later this yr. They count on that inflation will stay excessive and the unemployment fee to maintain falling.

The AUD/USD decline was principally due to the robust greenback. The bond market has continued its sell-off this week. On Tuesday, the yield of the 10-year bond rose to the very best stage in over two years. Bond costs and yields transfer inversely.

Rising bond yields is an indication that traders imagine that the Federal Reserve will proceed tightening in a bid to gradual inflation. Later at present, the AUD/USD pair will react to the newest American housing begins and constructing permits knowledge. Their impacts on the info shall be muted although.

AUD/USD Forecast

On the four-hour chart, we see that the AUD/USD pair has been in a bearish development prior to now few days. Along the way in which, it has shaped an ascending channel proven in black. It is at present hovering barely above the decrease facet of this channel.

It has additionally moved under the 38.2% Fibonacci retracement stage. Most importantly, the pair has moved under the 25-day and 50-day transferring averages whereas the Relative Strength Index (RSI) has dropped to 40. Therefore, the pair will seemingly maintain falling as bears goal the important thing help at 0.7125.


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