Aussie Plunges Below Crucial Support L

The AUD/USD also pulled back after the RBA delivered the minutes of the last meeting. 

• Buy the AUD/USD pair and set a take-profit at 0.6850.
• Add a stop-loss at 0.6725.
• Timeline: 1-2 days.

• Set a sell-stop at 0.6753 and a take-profit at 0.6700.
• Add a stop-loss at 0.6700.

The AUD/USD exchange rate declined after the strong US housing numbers and the latest minutes by the Reserve Bank of Australia (RBA). The Aussie dropped to a low of 0.6756, the lowest point since June 13th. This price was much lower than the month-to-date high of 0.6900.

The US published strong housing numbers on Tuesday. The data revealed that housing starts rebounded sharply in May. They rose by 21.7% in May to over 1.63 million during the month. Starts had previously tumbled by 2.9% in April.

The US also published strong building permits numbers. Building permits rose by 5.2% in May after falling by 1.4% in the previous month. In total, building permits increased to over 1.49 million on a seasonally adjusted basis.

These numbers mean that the housing sector is doing well even as interest rates holds at the highest level in more than a decade. Therefore, there is a likelihood that the numbers will push the Federal Reserve to hike interest rates again later this year.

The AUD/USD also pulled back after the RBA delivered the minutes of the last meeting. In the minutes, the RBA said that the decision to hike interest rates by 0.25% was finely balanced. It also said that the next rate decision will depend on inflation trends and the broad economy. As such, analysts believe that the bank will pause interest rate hikes in the next few minutes.

The Aussie retreated as concerns about the Chinese economy continued. In a note earlier this week, Goldman Sachs analysts lowered their outlook of the Chinese economy. They expect that the economy will expand by 5.4% this year.

Chinese authorities also expect the economy to worsen, which explains why the central bank decided to cut the prime rate by 15 basis points. The performance of the Chinese economy is important for Australia since it is the biggest buyer of the country’s goods.

The AUD to USD pair made a reversal after the RBA minutes and strong US housing numbers. As it dropped, the pair flipped the key support at 0.6817 (May 10th high) into a resistance. It also moved slightly below the 50-period moving average while the Relative Strength Index (RSI) is approaching the oversold level.

The AUD/USD pair is slightly above the Ichimoku cloud. It has formed a small hammer pattern, which is a bullish sign. Therefore, the pair willl likely continue rising, with the next level to watch being at 0.6850. The support for this trade will be at 0.6708.