Bearish view
Sell the AUD/USD pair and set a take-profit at 0.7050.
Add a stop-loss at 0.7200.
Timeline: 1-2 days.
Bullish view
Buy the AUD/USD pair and set a take-profit at 0.7200.
Add a stop-loss at 0.7050.
The AUD/USD pair retreated for the second consecutive days, reaching a low of 0.7140, a few points below last month’s high of 0.7210. This retreat happened as geopolitical tensions rose and after Australia published strong GDP numbers.
Australia GDP Growth Continues as Bond Yields Rise
The AUD/USD pair pulled back slightly as Australia released strong economic growth numbers. These numbers showed that the economy grew by 0.4% in the second quarter, higher than the expected 0.3%. This performance translated to an annual growth rate of 2.1%, also higher than the expected 1.8%.
Australia’s growth was driven by the final consumption, which rose by 0.5%. This growth was offset by a drop in capital expenditure and exports. As a result, there is a likelihood that the Reserve Bank of Australia (RBA) will deliver another rate hike later this year.
These numbers came as Australia bond yields. The 30-year yield jumped to 5.72%, the highest level in years. Similarly, the ten-year rose to 5.22%, its highest point in years.
The AUD/USD pair remained under pressure as the US and Iran intensified their attacks, leading to higher crude oil prices. Brent, the global benchmark, rose to $95, while the West Texas Intermediate (WTI) moved to $90.75. These prices may continue rising in the coming weeks as the war continues.
The pair is also reacting to the ongoing US bonds crash, with the 30 and 10-year yields rising to the highest level in years. US bonds have plunged because of the rising debt, which has moved to $40.1 trillion, while the economic growth has slowed.
The next key catalyst for the pair will be the upcoming ADP jobs report, which is expected to show that the private sector added 48k jobs.
AUD/USD Technical Analysis
The AUD/USD pair pulled back, reaching its lowest level since August 21. It has fallen from last month’s high of 0.7210.
A closer look shows that the pair has retested the lower side of the ascending channel. It also remains above the 50-day Exponential Moving Average (EMA), while the two lines of the Percentage Price Oscillator (PPO) have made a bearish crossover.
At this point, the pair may move in either direction. A break below the lower side of the channel will point to more downside, potentially to the psychological level of 0.7050. The alternative scenario is where the pair rebounds and retests the upper side of the channel.
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