The pair will likely keep falling as bears target the key support level at 0.6850, which was the lowest level on June 15th.
- Sell the AUD/USD pair and a take-profit at 0.6850.
- Add a stop-loss at 0.7025.
- Timeline: 1-2 days.
- Set a buy-stop at 0.700 and add a take-profit at 0.7050.
- Add a stop-loss at 0.6870.
The AUD/USD price retreated as the dollar strength continued as worries about a global recession continued. The pair dropped to a low of 0.6935, which is about 4.5% below the highest point this month.
Global Recession Worries
The AUD/USD pair has been in a strong bearish trend as investors continued worrying about the rising risk of a recession.
Global central banks like the Federal Reserve and the Reserve Bank of Australia (RBA) decided to ratchet up their rate hikes. Earlier this month, the RBA decided to deliver its interest rate for the second straight meeting. It also signaled that it will keep hiking rates in the coming meetings.
And last week, the Fed made headlines after it decided to deliver its biggest rate in almost three decades. It hiked rates by 0.75% and the Fed chair signaled that it will continue hike interest rates by either 0.75% or 0.50% in the coming meetings.
Therefore, the US dollar has continued strengthening as investors wait for a recession as rates surge. Historically, a combination of high interest rates, low unemployment rate, and high inflation usually leads to a recession.
Leading economic numbers have signaled that the American economy is weakening. The most important one is on housing. Data published last week showed that the country’s building permits and housing starts declined sharply in May.
A few weeks ago, additional data showed that the US retail spending, pending, and new home sales have been weakening. Therefore, there are signs that the weakness will continue as the Fed hikes rates.
The AUD/USD pair is also sliding as commodities retreat. The Bloomberg Commodity Index has dropped from $135 early this month to $127.7. The pair will likely be more muted since US markets will be closed for Juneteeth holiday.
The four-hour chart shows that the AUD/USD pair has been in a strong bearish trend in the past few days. The pair has moved below the first resistance line of Andrews Pitchfork. It has also dropped below the 50-day moving average while the Relative Strength Index has moved below the middle line.
The pair has moved below the important support levels at 0.700 and 0.7057. Therefore, the pair will likely keep falling as bears target the key support level at 0.6850, which was the lowest level on June 15th.