The pair will likely continue falling as sellers target the next key support at 0.6560, the lowest point in March.
- Sell the AUD/USD pair and set a take-profit at 0.6560.
- Add a stop-loss at 0.6725.
- Timeline: 1-2 days.
- Set a buy-stop at 0.6690 and a take-profit at 0.7750.
- Add a stop-loss at 0.6600.
The AUD/USD pair remained under pressure after signs emerged that the Chinese economy was not recovering as faster as originally expected. The pair drifted to a low of 0.6650, which was ~2.15% below last week’s high.
Data published by China’s statistics agency showed that the country’s inflation dipped in March, signaling that the country will need to implement more fiscal and monetary stimulus. The headline consumer price index rose by 0.7% in March, lower than the estimated 1%. The producer price index dropped by 2.5%, the lowest level since June 2020.
Slow inflation growth is a sign that the economy’s internal demand is not strong enough. Additional data revealed that household sentiment has remained at the lowest level since before the pandemic started in 2020. Still, the IMF believes that China’s economy will expand by 5.2% in 2023. China’s economic development are important for Australia because it is its biggest trading partner.
The AUD/USD will next react to the upcoming American inflation data that will come in the afternoon session. Economists expect the data to show that the headline consumer price index (CPI) dropped from 0.4% to 0.2% on a month-on-month basis. This will translate to a 6.0% to 5.2% on a YoY basis. Core inflation is expected to come in at 5.6%.
The Federal Reserve will publish minutes of the meeting held in March during the American session. These minutes will provide more information about what to expect in the coming meetings. Economists expect the Federal Reserve will hike interest rates by 0.25% in May this year.
The other important data to watch will be Australia’s jobs numbers scheduled for Thursday. While important, the impact will be a bit minimal since the next actions of the RBA have been priced in.
The AUD/USD pair has been in a strong downward trend in the past few days. It has moved below the lower side of the ascending channel. Most importantly, it has formed a break and retest pattern, which is usually a sign of a bearish continuation. The pair has also moved below the 50-period moving average. It stands at the first support of the Fibonacci pivot point.
Therefore, the pair will likely continue falling as sellers target the next key support at 0.6560, the lowest point in March.
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