Bullish View
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Buy the AUD/USD pair and set a take-profit at 0.7440.
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Add a stop-loss at 0.7250.
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Timeline: 2 days.
Bearish View
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Set a sell-stop at 0.7290 and a take-profit at 0.7200.
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Add a stop-loss at 0.7360.
The AUD/USD pair retreated in the overnight session as demand for US dollar and other safe havens rose amid the crisis in Ukraine. It is trading at 0.7335, which was the lowest level since Friday last week. The price is about 1.40% below the highest level this week.
Risk-Off Sentiment
The Australian dollar has been in a strong bullish trend in the past few days. This trend was mostly because of the performance of key commodities like gold, copper, and iron ore as the crisis in Ukraine continues. Indeed, the US dollar index has jumped to the highest level in more than 13 years.
The performance of key commodities is important for the Australian dollar because of the vast amount of commodities that the country exports. It sells commodities like natural oil, copper, and iron ore, pushing many analysts to call it a commodity currency.
The AUD/USD declined on Monday and during the Asian session as demand for US dollars rose. In times of crisis, investors believe that the US dollar is a safe haven. The CBOE VIX index, which is often seen as a measure of volatility, rose by over 6% on Monday.
Meanwhile, there is a likelihood that the RBA and the Federal Reserve will embrace a more hawkish tone in a bid to fight inflation. Recent data showed that Australian inflation jumped by more than 3.50% while that of the US rose by over 7.5%.
With the cost of most items rising, there is a possibility that the two banks will start hiking rates this year. The Fed is actually expected to start moving next week. Still, it is unlikely that these moves by the Fed and RBA will have an impact on rising inflation.
AUD/USD Forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bullish trend recently because of the rising commodity prices. It soared by about 6.8% from the lowest level this year to the highest point on Friday.
The spectacular rally ended on Monday as the pair started a sell-off. On the four-hour chart, it is approaching the key support at 0.7313, which was the highest level on January 13th. It remains slightly above the 25-day and 50-day moving averages.
A closer look shows that the pair seems to be doing a break and retest pattern, which is a bullish sign. Therefore, a retest of last weeks high of 0.7440 cannot be ruled out.