Current trend

During five weeks the AUD/USD is trading in a sideway range between 0.7830-0.7600 and is unlikely to leave it in the nearest future. At the moment the price is heading towards the lower border. The breakdown of levels 0.7720 (23.6% Fibonacci correction) and 0.7690 (the lower MA of Bollinger Bands) leads to the further reduction to 0.7600.

One of the recent important news is the publication of the June Quarterly Bulletin by the Reserve Bank of Australia. Bank officials are concerned about a consistent reduction in wages over the past few years, which slows domestic trade activity and lowers inflationary expectations. To deal with the issue the RBA may reduce interest rates for the third time this year, given the slowing inflation over the last three quarters.

Today the US Final Q1 GDP is released. The US economy indicators should be better than expected, and show only a 0.2% slowdown. It may strengthen the US currency.

Support and resistance

The price chart forms the "pennant" figure; the breakdown of its lower border leads to the reduction to levels of 0.7690, 0.7650 and 0.7600. However, the breakout of the upper line may cause the growth to 0.7795 and 0.7830.

Technical indicators give mixed signals. Bollinger Bands are moving downwards. MACD is in the positive zone, its volumes are stable. Only Stochastic lines have crossed each other and may soon turn down.

Support levels: 0.7720, 0.7690, 0.7650, and 0.7600.

Resistance levels: 0.7745, 0.7795, 0.7830.

Trading tips

Open short positions when the level of 0.7690 is broken through with targets 0.7650 and 0.7600. Open long positions if the price breaches the upper border of the "pennant" and consolidates above the level of 0.7745. Targets for long positions are 0.7795 and 0.7830.

AUD/USD: the prospects for significant reduction

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