The pair will likely keep rising as bulls target the key resistance level at 0.7200.
Buy the AUD/USD pair and set a take-profit at 0.7200.Add a stop-loss at 0.7030.Timeline: 1-2 days.
Set a sell-stop at 0.7060 and a take-profit at 0.6950.Add a stop-loss at 0.7125.
The AUD/USD pair has done relatively well since May 16th as investors react to the latest Albanese win and the retreating greenback. It is trading at 0.7100, which is above the monthly low of 0.6823.
Aussie Bounces Back
The Australian dollar tilted upwards as investors focus on the country’s new government. During the weekend, Australians elected Anthony Albanese to be the new prime minister. The center-left candidate has pledged to focus on climate change and wage growth. Still, analysts believe that implementing these programs will be much harder.
The AUD/USD pair also rose as the US dollar index declined. The closely-watched dollar index has fallen by more than 2% from its highest level this year and is now trading at the lowest point since early this month.
The dollar’s decline is mostly because of technical reasons considering that the Fed has insisted that it will continue tightening its policies. Additionally, data from the US has shown that the economy’s recovery has started slowing down.
The next key catalyst for the AUD/USD pair will be the upcoming data from the US. The US will publish the latest new home sales numbers. Economists expect the data to show that home sales declined to 750k in April from 763k in the previous month.
Markit will also release the latest flash manufacturing and services numbers. Economists believe that the two declined slightly in April as the cost of doing business rose. Still, historically, PMI numbers tend to lead to minimal volatility.
The Fed Chair will also deliver a speech, in which he will likely reiterate the commitment to keep hiking interest rates. The speech will come a day ahead of the latest FOMC minutes.
On the 4H chart, we see that the AUD/USD pair managed to move above the important resistance level at 0.7030, which was the highest level on May 18th. Along the way, it is approaching the 38.2% Fibonacci retracement level. The bullish trend is also being supported by the 25-day moving average while the Stochastic Oscillator has risen.
Therefore, the pair will likely keep rising as bulls target the key resistance level at 0.7200. A drop below the key support level at 0.7030 will invalidate the bullish view.