There is a possibility that the pair will likely keep rising as bulls target the key resistance level at 0.7200.
- Buy the AUD/USD and set a take-profit at 0.7200.
- Add a stop-loss at 0.6945.
- Timeline: 1-2 days.
- Set a sell-stop at 0.6950 and a take-profit at 0.6850.
- Add a stop-loss at 0.7100.
The AUD/USD pair tilted upwards as the US dollar rally eased. The pair rose to a high of 0.7042, which was the highest level since May 9th this year. It has risen by more than 2.50% from the lowest level this month.
Slowing China’s Economy and Australia’s Elections
The AUD/USD pair has risen even as worries of the plunging Chinese economy continues. Data published this week provided more color about the state of the country’s economy. The data revealed that the country’s retail sales and industrial production declined in April as the lockdowns in Shanghai continued.
These numbers raise worries that the Reserve Bank of Australia (RBA) will accelerate its hiking cycle in a bid to deal with a potential upsurge of inflation. These concerns are being seen in the bond market, with futures having a 98% chance of a 25 basis point hike in June. These futures also predict that rates will end the year at 2.73%.
Minutes of the RBA that were released on Tuesday showed that officials considered a 0.15%, 0.25%, and 0.40% rate hike in this month’s meeting.
The AUD/USD is also reacting to the latest Australian wage price index (WPI) data that came out in the morning session. The data showed that the wage price index rose to 2.4% in the first quarter. On a QoQ basis, the index remained at 0.7%.
The next key data to watch will be the latest US building permits and housing starts numbers that will come out later today. Economists expect these numbers to reveal that building permits declined from 1.87 million to 1.81 million in April. Housing starts are expected to have dropped from 1.793 million to 1.76 million. Still, the impact of these numbers on the AUD/USD pair will be limited.
The four-hour chart shows that the AUD/USD pair recovered and retested the important resistance level at 0.7031. This was an important level since it was the lowest level on May 2nd this month. The pair managed to move slightly above the 25-day and 50-day moving average while the Relative Strength Index (RSI) moved close to the overbought level. It has also formed a rounded bottom pattern.
Therefore, there is a possibility that the pair will likely keep rising as bulls target the key resistance level at 0.7200. A drop below the support at 0.6945 will invalidate the bullish view.