The AUD/USD currency pair has been experiencing a downward trend, with a recent plunge to its lowest point since April 13, 2023. This decline is attributed to the formation of a bearish flag and rising wedge pattern, indicating a potential steeper crash. The US non-farm payrolls (NFP) data, released on the latest date, has played a significant role in this movement. The strong job numbers have led to predictions of a divergence between the Federal Reserve and the Reserve Bank of Australia (RBA) regarding interest rate hikes.
The RBA's recent inflation and GDP data have reduced the likelihood of further interest rate hikes, as the bank has already increased rates three times this year, impacting economic growth. In contrast, the Federal Reserve may decide to hike rates later this year, as evidenced by the well-performing labor market in May. The job vacancies have been rising, and the economy has created over 172,000 jobs, with the NFP coming in better than expected for the third consecutive month.
The bond market is also signaling a potential rate hike by the Fed, with the two-year bond yield reaching 4.145%, its highest point since May 27. The ten-year yield has also jumped to 4.53%. These economic indicators suggest a potential divergence in monetary policies between the US and Australia, which could impact the AUD/USD pair.
From a technical analysis perspective, the AUD/USD pair has retreated sharply from a high of 0.7276 to 0.7025, breaking below the 50-day Exponential Moving Average (EMA). The formation of a bearish flag pattern, consisting of a vertical line and an ascending channel, further confirms the bearish sentiment. Additionally, the rising wedge pattern, a common bearish sign, adds to the negative outlook. The Relative Strength Index (RSI) has also dropped below 50, indicating a potential continuation of the downward trend.
The key support level at 0.6832, reached on May 31, is a critical area to watch. If the pair breaks below this level, it could lead to a steeper crash. Traders are advised to consider selling the AUD/USD pair with a take-profit at 0.6900 and a stop-loss at 0.7120, with a timeline of 1-3 days. However, it's important to note that the market dynamics can change rapidly, and further analysis is recommended before making any trading decisions.
In conclusion, the AUD/USD pair's recent decline is influenced by a combination of fundamental and technical factors. The divergence in monetary policies between the US and Australia, strong US job numbers, and the bearish chart patterns suggest a potential steeper crash. Investors should carefully consider these factors and conduct thorough research before engaging in any trading activities.
