The pair will likely resume the bearish trend as sellers target the next key psychological level at 0.6800.

Bearish view

• Sell the AUD/USD pair and set a take-profit at 0.6800.
• Add a stop-loss at 0.7000.
• Timeline: 1 day.

Bullish view

• Set a buy-stop at 0.6965 and a take-profit at 0.7048.
• Add a stop-loss at 0.6880.

The AUD/USD price rebounded slightly as the recent US dollar rally took a breather. It rose to a high of 0.6963, which was the highest point since August 17. That price was about 1.17% from its lowest level this week.

US dollar rally takes a breather

The Australian dollar has pulled back recently amid a sustained US dollar comeback. The closely watched dollar index managed to move from this month’s low of $104.3 to over $109.30. This rally accelerated after the Federal Reserve published the minutes of the last meeting. These minutes showed that the bank was committed to continuing with the hiking process.

However, data published recently could see the bank reducing the pace of tightening. For example, on Tuesday, numbers released by S&P Global showed that the services PMI declined to 44.1 in August as demand waned and cost of doing business rose. A PMI reading of 50 and below is usually a sign that an industry is contracting.

Meanwhile, new home sales declined by 12.6% in July to 511k. This decline was worse than the median estimate of 575k. These numbers, together with the pending and existing home sales, imply that the housing sector is cooling down.

The AUD/USD price has also been in a downward trend because of the weakening Chinese economy. On Monday, the country’s central bank decided to slash interest rates in a bid to stimulate the economy. It slashed the five-year prime mortgage rate to 4.3%.

The deteriorating Chinese economy will have a negative impact on Australia. For one, analysts expect that iron ore prices will drop by half by next year because of the deteriorating housing sector in China. Analysts also expect that the Chinese economy will have a slower growth than the 5.5% that the government expects.

AUD/USD forecast

The AUD/USD slipped to a low of 0.6865 on Tuesday and then bounced back slightly after the weak US data. This price was an important one since it was the lowest point since August 5.

It has struggled moving below the support level several times since Monday. The pair is slightly above the 38.2% Fibonacci Retracement level while the MACD has tilted upwards. The pair will likely resume the bearish trend as sellers target the next key psychological level at 0.6800.

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The pair will likely remain in this range on Monday as investors watch for the upcoming US housing and consumer confidence data.

Bullish View

• Set a buy-stop at 1.2320 and a take-profit at 1.2400.
• Add a stop-loss at 1.2220.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 1.2250 and a take-profit at 1.2165.
• Set a stop-loss at 1.2320.

The GBP/USD price moved sideways last week even as the UK economy faced significant headwinds. It also remained in a tight range after the Fed Chair testimony to Congress and the Senate. It is trading at 1.2275, where it has been in the past few days.

UK Economy Under Pressure

Economic data published last week revealed that the UK economy is struggling. On Wednesday, numbers by the Office of National Statistics (ONS) showed that the country’s inflation surged to the highest point in over four decades. The overall inflation rose by 9.1% in May this year while core prices rose by 6.5%. These numbers are significantly higher than the Bank of England’s target of 2.0%.

And on Friday, data revealed that the country’s retail sales declined in May as inflation surged. The headline retail sales fell by 0.5% between April and May, erasing the previous month’s gains. Sales have dropped as 9 of 10 Britons said that they were spending less due to the rising cost.

Meanwhile, data published by Gfk showd that the country’s consumer confidence is slipping. Consumer confidence dropped by 1 point to minus 41 in June. This was the lowest reading in 48 years. As such, these numbers mean that the government’s aid has not done enough to bolster sentiment.

Therefore, with the UK facing a stagflation, there are concerns about what the Bank of England (BOE) will do in the coming months. The bank has already hiked interest rates in the past five meetings and analysts believe that the trend will continue.

The GBP/USD pair will then react to the latest US consumer confidence that are scheduled for Tuesday. Like in the UK, analysts expect the data to show that confidence dropped sharply in June as inflation rose.

GBP/USD Forecast

The four-hour chart shows that the GBP/USD pair has been in a consolidation phase in the past few days. It is trading at 1.2275, which is slightly below the important resistance at 1.2320, which was the highest point last week. The pair is also consolidating along the 50-day moving average and the middle line of Bollinger Bands.

The pair will likely remain in this range on Monday as investors watch for the upcoming US housing and consumer confidence data. A move above the resistance at 1.2300 will signal that bulls have prevailed and push the pair to June 16th high of 1.2400.

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The pair will likely have a relief rally ahead of the Fed decision and then resume the bearish trend ahead of the BOE.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.1850.
• Add a stop-loss at 1.2050.
• Timeline: 1 day.

Bullish View

• Set a buy-stop at 1.1980 and a take-profit at 1.2050.
• Add a stop-loss at 1.1900.

The GBP/USD price continued its remarkable sell-off as UK stagflation risks continued. The pair slumped to 1.1950, which was the lowest level since March 2020. It is on track to drop for the third consecutive week. Also, sterling has dropped by over 16% from its highest point in May 2021.

UK Stagflation Concerns

The UK is going through a period of stagflation where slow economic growth has converged with a period of high inflation.

Data published on Monday revealed that the country’s economy contracted for the second straight month in April. The numbers also showed that key sectors of the economy like construction, industrial, and manufacturing output also declined in April.

And on Tuesday, data by the Office of National Statistics revealed that the labor market is also experiencing jitters as inflation soars. The unemployment rate rose unexpectedly while wage growth rose at a slower pace than expected. These numbers imply that inflation is rising at a faster pace than wages.

Therefore, the GBP/USD pair is crashing as investors anticipate divergence between the Federal Reserve and the Bank of England.

On the one hand, the Fed is expected to continue tightening at a more aggressive pace, with some analysts expecting a 0.75% increase. The bank is also expected to point towards more hikes later this year.

On the other hand, analysts expect that the Bank of England will hesitate when it meets on Wednesday. This means that the bank will deliver a relatively bearish rate hike. The concern among the BOE is that more rate hikes in a period of stagflation will hurt the economy.

The GBP/USD pair will react mildly to the latest US retail sales numbers that will come out during the American session. These numbers are expected to show that the country’s retail sales declined in May.

GBP/USD Forecast

The three-hour chart shows that the GBP/USD pair has been in a strong bearish trend in the past few days. Its attempt to rebound on Tuesday failed when it moved to 1.2200. The pair managed to move below the important support at 1.2163, which was the lowest level on May 13th. It also dropped below 1200.

It has moved below the 25-day and 50-day moving averages and is along the lower side of the Bollinger Bands. Therefore, the pair will likely have a relief rally ahead of the Fed decision and then resume the bearish trend ahead of the BOE. The key level to watch will be at 1.1900.

The pair will likely keep rising as bulls target the next key resistance level at 0.7300.

Bullish View

• Buy the BTC/USD pair and set a take-profit at 0.7300.
• Add a stop-loss at 0.7127.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 0.7150 and a take-profit at 0.7100.
• Add a stop-loss at 0.7250.

The AUD/USD price moved sideways on Wednesday morning after the latest Australian GDP and Chinese PMI numbers. It is trading at 0.7185, which is about 5.32% above the lowest level in May.

Australia GDP Data

The Australian economy did relatively well in the first quarter after the government decided to remove some of the previous travel restrictions. According to the country’s statistics agency, the economy expanded by 3.3% on a year-on-year basis. It rose by 0.8% from the previous quarter helped by strong consumer spending.

These numbers came a day after the agency published weak current account data for Q1. The accounts declined from over a$13.2 billion to a$7.5 billion. This happened as the net export contribution declined by 1.7% in the quarter.

Still, these numbers will likely have no major impact on the Reserve Bank of Australia (RBA), which is expected to deliver its decision on Tuesday. Analysts expect that the bank will deliver another rate hike as it struggles to prevent hyper-inflation.

Turning to the economic calendar, the next key data to watch will be the manufacturing output numbers from the US. Economists expect the data by Markit to show that the PMI dropped from 59.2 to 57.5. They expect that the ISM PMI data dropped slightly in May.

The AUD/USD pair will also react mildly to the latest JOLTs job vacancies numbers. The data is expected to show that the number of vacancies in the US remained above 10 million in April. These numbers will come a day after the Conference Board said that consumer confidence declined at a slower pace than expected.

AUD/USD forecast

The AUD/USD pair rose on the first trading day of June. It is trading at 0.7200, which is slightly below this week’s high of 0.7210. On the four-hour chart, the pair has moved between the 38.2% and 50% Fibonacci Retracement level.

It is being supported by the 25-day and 50-day moving averages and is between the ascending channel. Also, the pair has moved above the important support level at 0.7127. The pair will likely keep rising as bulls target the next key resistance level at 0.7300.

The outlook for the pair is currently bullish bias.

Bullish View

• Set a buy-stop at 0.7030 and a take-profit at 0.7100.
• Add a stop-loss at 0.6950.
• Timeline: 2 days.

Bearish View

• Set a sell-stop at 0.6950 and a take-profit at 0.6900.
• Add a stop-loss at 0.7050.

The AUD/USD pair rose slightly during the Australian session as investors reacted to the stronger US dollar and the latest Australian jobs data. The pair rose to a high of 0.700, which was close to this week’s high of 0.7031.

Australia’s Labor Market Tightening

The Australian job market is tightening at a slower pace than expected. According to the latest jobs report, the country’s unemployment rate declined from 4.0% in April to 3.9% in April, This was the lowest level on record. The same trend happened in the UK, where the unemployment rate crashed to the lowest point in nearly 50 years.

Meanwhile, the Australian economy added just 4,000 jobs in April after adding over 17.9k in March. This increase was significantly lower than the median estimate of 30k. The participation rate dropped from 66.4% to 66.3%. These numbers show that the country’s economy is doing well. However, the biggest challenge is that real incomes are falling. Data published on Wednesday showed that real incomes rose by just 0.7% in March as inflation jumped.

The AUD/USD pair’s price action happened as investors reflected on the hawkish statement by the Federal Reserve chair. Speaking at a WSJ event, Jerome Powell said that the bank will continue hiking interest rates in a bid to tame the soaring inflation.

The next key mover for the pair will be the Philadelphia Fed manufacturing index and the initial jobless claims numbers. The impact of these numbers on the pair will be much lower.

Perhaps, investors are still preparing for the upcoming Australian election that will happen during the weekend. Analysts expect that the outcome of these results will be close although labor remains in the lead. Still, Scott Morrison has managed to cover his gap recently.

AUD/USD Forecast

The AUD/USD pair formed a strong resistance level at 0.7031, which was the highest level on May 9th. The pair has moved slightly below the 50-day moving average. Further, the Relative Strength Index (RSI) and the money flow index (MFI) have diverged. The RSI pointing upwards and the MFI is facing downwards.

The outlook for the pair is currently bullish bias. A move above this week’s high of 0.7031 will signal that bulls have prevailed and will open the possibility of it rising to 0.7100. On the other hand, a move below 0.6950 will open the possibility of the pair moving below 0.6850.

There is a likelihood that the pair will keep rising as bulls target the key resistance at 42,000.

Bullish View

• Buy the BTC/USD pair and set a take-profit at 42,000.
• Add a stop-loss at 38,400.
• Timeline: 1 day.

Bearish View

• Set a sell-stop at 38,800 and a take-profit at 36,000.
• Add a stop-loss at 40,000.

The BTC/USD pair rose after the Fed raised its interest rates. The pair rose to a high of 40,000, which was the highest level since April 29th. It has risen by more than 6% from its lowest level last week.

Fed Interest Rate Hike

Bitcoin and stocks edged upwards in the overnight session as investors digested the Fed interest rate decision. Bitcoin retested the important resistance level at 40,000 while the Dow Jones and Nasdaq 100 indices rose by more than 2%.

At the same time, the US dollar index, which tracks the performance of the greenback against a basket of currencies, declined by more than 0.50%.

In its first monetary meeting since March, the Fed decided to hike interest rates by 0.50%. This increase was the highest it has been since 2000. It was also the first time that the bank has hiked interest rates in two straight meetings.

In theory, such a big rate hike and a commitment to continue tightening should be bearish for Bitcoin and stocks. However, prices rose simply because the situation was already priced in by the market. It is a situation known as sell the rumours and then buy the news.

The BTC/USD is also rising as investors believe that the Fed has become overly ambitious considering that the economy is slowing. It barely moved in the first quarter and flash economic numbers show that the economy has declined. For example, the number of job additions has slowed and pending home sales have declined.

Therefore, since the Fed has a long history of being over-ambitious, there is a likelihood that it will not implement the hikes it has pledged.

BTC/USD Forecast

The BTC/USD pair has been making a comeback in the past few days. This comeback accelerated when the Fed made its decision. It managed to move above the upper side of the descending channel shown in black. The pair has moved above the 25-day and 50-day moving averages while the MACD has moved above the neutral level.

Bitcoin managed to jump above the important resistance level at 39,000, which was the highest point on Tuesday. Therefore, there is a likelihood that the pair will keep rising as bulls target the key resistance at 42,000.

More downside will be confirmed if the price moves below the support at 0.7345.

Bearish View

• Set a sell-stop at 0.7345 and a take-profit at 0.7275.
• Add a stop-loss at 0.7450.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 0.7400 and a take-profit at 0.7500.
• Add a stop-loss at 0.7300.

The AUD/USD brushed off the latest minutes by the Reserve Bank of Australia (RBA) and the global economic downgrade by the IMF. The pair is still hanging near its lowest point since March 17th. It has fallen by more than 3.50% from its highest level this month.

RBA Minutes and Economic Slowdown

The RBA published the minutes of this month’s meeting on Tuesday. These minutes had no implication on the AUD/USD because they were in line with what analysts were expecting. The members agreed that inflation had picked up and that more upside was possible. They expect that the rate will be above 3% in the second quarter.

The members also believe that the economy was resilient and that consumer spending was rising after the government ended its travel restrictions. Most importantly, the committee said that the recent developments had caused it to bring forward the timing of its first rate hike. Analysts now expect that the first 0.25% rate hike will happen in June.

The AUD/USD weakness coincided with the overall strong US dollar. The dollar index crossed the $101 resistance level for the first time in years. It has been in a strong bullish trend as investors price in more and higher rate hikes by the Federal Reserve.

On Tuesday, US bond yields continued rising, with the 30-year crossing the 3.0% resistance level for the first time in years. Another notable thing was US real yields are close to moving to a positive level for the first time since March 2020. US inflation-adjusted bond yields rose to -0.04%, a sign tht bond payouts are about to exceed the medium-term inflation expectations.

The only data to watch on Wednesday will be the US existing home sales numbers. Economists expect these numbers to show that existing home sales dropped from 6.02 million in February to 5.80 million in March.

AUD/USD Forecast

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 has also dropped below the 25-period and 50-period moving averages. It has also moved between the lower and middle lines of the Bollinger Bands while oscillators have been falling.

Therefore, more downside will be confirmed if the price moves below the support at 0.7345. If this happens, it will signal that there are still more sellers in the market. A move above the resistance at 0.7400 will invalidate this view.