Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7100.
Add a stop-loss at 0.7000.
Timeline: 1-2 days.
Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7000.
Add a stop-loss at 0.7100.
The AUD/USD pair was flat on Wednesday as traders focused on geopolitics and key macro numbers from the United States. It was trading at 0.7040, much higher than last month’s low of 0.6865.
US Oil Prices Trigger Risk-On Sentiment
The US dollar retreated modestly as traders embraced a risk-on sentiment as crude oil prices dived. Brent, the global benchmark, dropped to $78 from last month’s high of $100. The initial surge happened after the US and Iran restarted their war, raising concerns about supply shortages.
Crude oil prices have dropped sharply this week after President Donald Trump halted his planned strikes against Iran. Those strikes would have led to substantial challenges in the energy markets, leading to higher inflation.
Oil prices plunged after Secretary Scott Bessent announced that a deal to reopen the Strait of Hormuz was near. Media reports suggest that the deal will involve Iran and Oman, which will charge a fee to ships transiting through the Strait.
The next few days will be important for the AUD/USD pair. The US will publish the latest services PMI numbers later today, with the ISM and S&P Global numbers expected to come in above 50. A figure of 50 and above would be a sign that a sector is growing.
ADP will release the latest private payrolls numbers. After that, the Bureau of Labor Statistics (BLS) will release the July nonfarm payrolls data, which will provide more hints about the US economy. They will also have an impact on the Federal Reserve interest rate decision.
After that, the Reserve Bank of Australia (RBA) will deliver its interest rate decision next week. There is still a risk that the bank will decide to hike rates in this meeting to combat the elevated inflation.
AUD/USD Technical Analysis
The four-hour chart shows that the AUD/USD pair has rebounded this month, moving from a low of 0.6923 to 0.7046 today. The current level is important because it coincides with the highest swing on August 3.
Moving above this level will invalidate the forming double-top pattern, which often leads to a bearish breakout. The Relative Strength Index (RSI) has jumped to 63, its highest point since Friday last week.
The pair will likely continue rising as the risk-on sentiment continues. If this happens, the next level to watch will be at 0.7100. A drop below the psychological level of 0.7000 will invalidate the bullish outlook.
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