AUD/USD held near 0.6930 on Thursday as the Middle East crisis reignited and divided Fed minutes clouded the rate outlook. A bearish flag below the 50-day EMA points the next move toward 0.6865.
The Australian dollar stayed pinned in a tight range on Thursday, trading at 0.6930 as traders weighed fresh Fed minutes against an escalating conflict in the Middle East. The technical setup leans bearish, with the next downside target at 0.6865.
Middle East crisis pushes oil higher
The pair coiled inside a narrow band after President Donald Trump declared the ceasefire over. The US launched more attacks on Iranian targets overnight, with CENTCOM citing Iran's decision to shoot ships crossing the Strait of Hormuz, and Iran struck back at US targets in the region.
That flare-up sent crude and natural gas prices higher again. Brent rose to $80 while West Texas Intermediate jumped to $75, raising odds that inflation will keep rising in the coming weeks.
Divided Fed minutes muddy the outlook
Minutes from the last Federal Reserve meeting showed the FOMC split on the path ahead. Some officials argued for a rate hike later this year because inflation has stayed above the 2% target for years, while others said the bank should consider cutting if inflation starts to fall.
Market participants are still pricing in a rate hike later this year. Attention now turns to upcoming US data: economists expect existing home sales to have risen to 4.19 million in June from 4.17 million, with initial and continuing jobless claims also due and Lorie Logan and John Williams set to speak.
Bearish flag caps the technical picture
On the daily chart the pair has drifted sideways for several days, sitting a few points below the upper side of a descending channel and below its 50-day Exponential Moving Average (EMA). It has also formed a bearish flag pattern, which according to DailyForex "normally leads to more downside over time."
The forecast stays bearish as long as price holds below the channel's upper boundary, with 0.6865 the level to watch. A move back above that boundary would invalidate the setup.
Source: DailyForex
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