Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6540.
• Add a stop-loss at 0.6685.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 0.6670 and a take-profit at 0.6750.
• Add a stop-loss at 0.6585.

The US dollar index jumped as investors and traders embraced a risk-off sentiment ahead of an important week in the market. The greenback strengthened against most currencies, including the Australian dollar, which dropped to the lowest point since March 15.
 

US inflation and earnings season

The AUD/USD exchange rate declined as the focus among traders remained on the United States. There will be three main catalysts for the pair this week.

First, the US will publish the latest inflation data on Wednesday. These numbers will show the state of the American economy as the Fed continues tightening. Economists polled by Reuters expect that the headline inflation rose dropped from 6.0% to 5.2% in March. If they are accurate, it will be the eighth straight month of declines.

Supporting the decline in inflation is the fact that online prices have dipped in the past few months. Data published on Monday showed that online prices dropped for the seventh straight month as prices of key items like electronics and home goods fell. Data by Adobe revealed that online prices dropped by 1.7% on a year-on-year basis.

These numbers are important because the proportion of Americans shopping online has been in an upward trend in the past few years. However, the data also excludes key items that are driving inflation like gasoline prices.

The other important catalyst for the AUD/USD pair will be the upcoming minutes by the Federal Reserve. These minutes, which will come out on Wednesday, will provide more details about the deliberations in the past meeting. They will also provide clues about what to expect.

Meanwhile, in Australia, the Bureau of Statistics will publish the latest jobs numbers on Thursday. The impact of these numbers on the pair will be limited because the RBA has paused its rate hikes.
 

AUD/USD technical analysis

The 4H chart shows that the AUD/USD pair has been in a steep downward trend after peaking at 0.6800 last week. It managed to move below the lower side of the ascending channel. Also, the pair dropped below the Woodie pivot point and the 23.6% Fibonacci Retracement level. It has dropped below the 25-period moving average while the MACD has dropped below the neutral point.

Therefore, the pair will likely continue falling as sellers target the second support of the Woodie pivot point at 0.6540.

(Click on image to enlarge)

More By This Author: