(MENAFN- Daily Forex) Bullish view
Buy the AUD/USD pair and set a take-profit at 0.6700. Add a stop-loss at 0.6585. Timeline: 1-2 days.
Bearish view
Set a sell-stop at 0.6630 and a take-profit at 0.6585. Add a stop-loss at 0.6700.
The AUD/USD
exchange rate continued its downward trend this week as concerns about the Chinese
Economy continued. It dropped for six straight days and moved to its lowest swing since July 2nd. It has retreated by over 2.37% from its highest level this month.
The Australian dollar continued its freefall after the People's Bank of China (PBoC) decided to slash interest rates again. It cut the one-year loan prime rate to 3.55%, the first reduction since August last year. It also reduced the five-year rate that is mostly focused on mortgages to 3.85%.
The rate cuts came after China published a set of weak economic data. The economy grew by 4.7% in the second quarter, missing the consensus estimate of 5.1%. Industrial production, an important measure of the economy, also slowed. Therefore, these rate cuts are aimed at stabilizing the economy.
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The AUD/USD pair is usually affected by China's economic activity because the country's is the biggest buyer of Australian goods like iron ore and coal. A slowing Chinese could affect the Australian economy.
The next important catalyst for the pair will be the US existing home sales data. Economists expect the data to show that sales fell from 4.11 million in May to 3.99 million in June. While important, the numbers will have not have an impact on the pair.
The other data to watch will be the flash manufacturing and services PMI numbers from Australia and the United States scheduled on Wednesday. Still, the key data that will have a big impact on the pair will be Friday's Personal Consumption Expenditure (PCE) report.
PCE is an inflation data that looks at change of prices of products in both rural and urban areas and is Fed's favorite inflation number/USD technical analysis
The AUD/USD exchange rate has dropped sharply in the past few days. It has retreated for six days straight and is nearing the lower side of the ascending channel. The pair has also moved below the 50-day moving average.
Also, the two lines of the MACD have formed a bearish crossover while the histogram have moved below the neutral point. The Relative Strength Index (RSI) has dropped below 50 and is pointing downwards.
The pair will likely bounce back on Tuesday as some investors buy the dip. If this happens, the pair will likely retest the resistance point at 0.6700.
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