AUD/USD Forex Signal Today 08/05: Bearish Engulfing (Chart)

(MENAFN- Daily Forex) Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6300.
• Add a stop-loss at 0.6520.
• Timeline: 1-2 days.

Bullish view

• Sell the AUD/USD pair and set a take-profit at 0.6520.
• Add a stop-loss at 0.6300.

The AUD/USD exchange rate retreated after a relatively hawkish statement from the Federal Reserve. It formed a bearish engulfing pattern and dropped to a low of 0.6430, its lowest level since Friday last week Reserve rate decision and US-China trade talks

The AUD/USD pair retreated after the Federal Reserve delivered its interest rate decision. As was widely expected, the bank left the official cash rate between 4.25% and 4.50%, defying Donald Trump who has called for a more aggressive cutting cycle.

The Fed maintained a wait-and-see policy as it observes the impact of tariffs on the US economy. In its statement, the committee noted that the size of the tariffs was higher, meaning that the longer-term economic outlook may be dire than expected.

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Recent data have shown that inflation has been moving downwards, and analysts expect another two months of weak price growth. This trajectory will be because of the falling energy prices and the fact that many large companies bought many goods in advance, leading to a recore trade deficit in March.

The AUD/USD pair declined because the decision pushed more analysts to rule out a rate cut in June. Instead, many expect that the first cut may come in July or later this year if inflation continues moving downwards.

The pair also reacted to the rising optimism about trade between the US and China as officials prepare to meet in Switzerland. This meeting hopes to de-escalate a situation that has worsened in the past few months.

A potential trade deal between the US and China would benefit Australia because of the vast amount of goods that flow between the two countries.

There will be no major market-moving economic data from the United States and Australia. The only data to watch will be the US initial and continuing jobless claims data.

EURUSD Chart by TradingViewAUD/USD technical analysis

The AUD/USD pair rose to a high of 0.6515, its highest level since November last year. It then formed a bearish engulfing pattern, which happens when a large bearish candlestick follows a smaller bullish candle. It is a popular bearish reversal sign.

The pair has moved to the 50% Fibonacci Retracemt level, while the two sides of the MACD are starting to diverge. Therefore, the pair will likely continue falling as sellers target the key support at 0.6300, the 38.2% retracement point.

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