- Sell the AUD/USD pair and set a take-profit at 0.6580.
- Add a stop-loss at 0.6700.
- Timeline: 1-2 days.
- Set a buy-stop at 0.6680 and a take-profit at 0.6750.
- Add a stop-loss at 0.6600.
The Australian dollar went nowhere on Tuesday morning as concerns about the American economy continued. The AUD/USD exchange rate was stuck at 0.6648, where it has been in the past few days as investors digest the latest debt ceiling news.
Joe Biden and Speaker Kevin McCarthy held their second face-to-face meeting in two weeks to deliberate on the debt crisis issue. In their meeting earlier this month, the two made no major breakthrough. Instead, they decided to set a small group to deliberate on key issues.
McCarthy, who is under pressure from his caucus insists that any decision to pass a debt-ceiling bill will need to include spending cuts. Some of his proposals include undoing actions of Joe Biden such as funding the IRS and scrapping the student debt forgiveness issue. Biden called those proposals unreasonable.
Their meeting on Monday ended without a concrete proposal to end the stalemate. Instead, they committed to continue talking before the June 1 deadline. Analysts believe that the two sides will ultimately reach a deal to avoid the US from defaulting. A default would lead to a jump in the unemployment rate and a fall in asset prices.
The AUD/USD pair also moved sideways after the latest statements by several Fed officials. Raphael Bostic said that he backed a June rate pause. He joined Neel Kashkari who believes that the bank should pause and observe the impact of the last rate hikes. Some officials, including members of the FOMC believe that more rate hikes are needed since inflation remains high.
The pair will react to the latest flash manufacturing and services PMI data from the US and new home sale data. Economists expect that new home sales jumped by 3.3% in April after rising by over 9% in the previous month.
The AUD/USD pair has been in a tight range in the past few days. It is slightly above the important support level at 0.6627, the lowest point on April 10 and March 24th. The pair has moved slightly below the 50-period moving average while the Awesome Oscillator dropped below the neutral level. It is also below the Ichimoku cloud.
Therefore, the pair will likely remain in this range on Tuesday ahead of the upcoming FOMC minutes scheduled for Wednesday. The key support and resistance levels to watch are 0.6600 and 0.6685.
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