AUD/USD Forex Signal: Extremely bearish below 0.7345
Further declines will be confirmed if the price breaks below the support at 0.7345.
- Set a sell stop at 0.7345 and a take-profit at 0.7275.
- Add a stop-loss at 0.7450.
- Lead time: 1-2 days.
- Set a buy-stop at 0.7400 and a take-profit at 0.7500.
- Add a stop-loss at 0.7300.
AUD/USD swept aside the last few minutes from the Reserve Bank of Australia (RBA) and the IMF’s downgrade of the global economy. The pair is still hanging near its lowest point since March 17th. It has fallen more than 3.50% from its highest level this month.
RBA minutes and economic downturn
The RBA released the minutes of this month’s meeting on Tuesday. These minutes had no implications for the AUD/USD as they were in line with what analysts expected. Members agreed that inflation had accelerated and that more upside was possible. They expect the rate to be above 3% in the second quarter.
Members also believe the economy held up and consumer spending picked up after the government ended its travel restrictions. More importantly, the committee said recent developments have caused it to bring forward the timing of its first rate hike. Analysts now expect the first rate hike of 0.25% to occur in June.
The weakness in AUD/USD coincided with the overall strength of the US dollar. The Dollar Index broke through the $101 resistance level for the first time in years. It has been in a strong uptrend as investors anticipate more and higher rate hikes from the Federal Reserve.
On Tuesday, US bond yields continued to climb, with the 30-year breaking the 3.0% resistance level for the first time in years. In another notable development, US real yields are poised to turn positive for the first time since March 2020. Inflation-adjusted US bond yields reached -0.04%, a sign Bonds are poised to beat medium-term inflation expectations. .
The only data to watch on Wednesday will be US existing home sales numbers. Economists expect the figures to show existing home sales fell from 6.02 million in February to 5.80 million in March.
On the 4H chart, the AUD/USD pair has formed a head and shoulders pattern. In price action analysis, this pattern is usually a bearish sign. The pair also fell below the 25 and 50 period moving averages. It also moved between the lower and middle lines of the Bollinger Bands as the oscillators fell.
Therefore, further downside will be confirmed if the price breaks below the support at 0.7345. If this happens, it will signal that there are even more sellers in the market. A move above the resistance at 0.7400 will invalidate this view.