AUD/USD Forex Signal: Retreat to 0.7440 Likely as Momentum Fades
The overall trend will remain being bullish in the near term.
Sell the AUD/USD and set a take-profit at 0.7440.Add a stop-loss at 0.7525.Timeline: 1 to 2 days.
Set a buy-stop at 0.7530 and a take-profit at 0.7600.Add a stop-loss at 0.7460.
The AUD/USD pair held steady close to its highest level since November 2 last year ahead of the upcoming Australian budget. It is trading at 0.7515, which is 7.8% above the lowest level this year. It has also risen in the past four straight days.
The biggest catalyst for the AUD/USD pair this week will be the latest Australian budget reading that will happen on Tuesday. Analysts expect the budget to lead to a substantial budget deficit as the government focuses on key issues in the economy.
According to the Australian Financial Review, Scott Morrison’s administration will unveil several projects as the economy reopens. For example, it will provide a A$250 stimulus check to low and middle-income earners. Another part of the budget will be on tax cuts for fuel in a bid to lower the current high energy prices.
Therefore, AUD/USD traders will be looking at the budget and its impact on the economy. For example, new stimulus checks are expected to push inflation substantially higher than where it is today. These checks have been blamed for the substantially higher inflation rate in the US.
As such, there is a likelihood that the Reserve Bank of Australia (RBA) will deliver its first interest rate hike in the coming months. Besides, other central banks in Canada, the US, the UK, and New Zealand have all embraced a more hawkish policy stance. This explains why the AUD/USD has risen in the past few weeks.
The economic calendar will have no major events today. Therefore, investors will continue focusing on the crisis in Ukraine as they wait for the Australian budget report. The other key mover will be the American consumer confidence data by the Conference Board. The one by Michigan University showed that confidence dropped to the lowest level in over 10 years.
The AUD/USD pair has been in a strong bullish trend in the past few days. Last week, it managed to move above the important resistance level at 0.7440, which was the highest point on March 7th. It has risen above the 25-day and 15-period moving averages while the MACD has started to form a bearish crossover pattern.
Therefore, the likely scenario is where the pair retreats and retests the support at 0.7440 through what is known as a break and retest pattern. The overall trend will remain being bullish in the near term.