Brief Pullback Likely as it Gets Overs

The past two weeks have had a lot of activity in the financial market.

• Buy the AUD/USD pair and set a take-profit at 0.6750.
• Add a stop-loss at 0.6600.
• Timeline: 1-2 days.

• Set a sell-stop at 0.6670 and a take-profit at 0.6600.
• Add a stop-loss at 0.6750.

The Australian dollar retreated on Monday morning as traders brace for a relatively quiet week in the economic calendar. It dropped to a low of 0.6678, which was a few points below last week’s high of 0.6915.

The past two weeks have had a lot of activity in the financial market. For example, the US published encouraged consumer inflation data, which showed that prices were falling. The headline inflation dropped to a multi-month low of 4.0% in May.

The other important event was the Fed’s interest rate decision. In it, the Fed decided to leave interest rates unchanged for the first time in months. It then hinted that it will resume hiking rates in the coming meetings. In his testimony to Congress last week, Jerome Powell pointed to two more rate hikes this year. He believes that the battle against inflation is yet to be won.

The economic calendar will have no major events this week. The ones to watch will be the upcoming US consumer confidence data scheduled for Tuesday. This is an important number since consumer spending is the biggest part of America’s economy.

The US will also publish the latest new home sales numbers. Economists expect these numbers to show that sales held quite well during the month. Last week, the US released strong existing home sales, building permits, and housing starts numbers.

The AUD/USD pair will also react to the unfolding events in Russia, where a rebellion emerged during the weekend. While these tensions have faded, there are still some substantial risks that could push commodity prices higher.

The Australian dollar tumbled hard against the US dollar. As it dropped, the pair moved below the important support level at 0.6817, the highest point on May 10th. The 25-period and 50-period moving averages made a bearish crossover. Further, the pair has moved below the Ichimoku cloud.

The Relative Strength Index (RSI) and the Stochastic Oscillators have moved to oversold levels. Therefore, while the pair has more downside in the near term, there is a possibility that it will have a dead cat bounce as some traders buy the dip.

If this happens, the pair will likely retest the important resistance point at 0.6750 and then resume the downward trend.

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