With the dollar finding its swagger again this week, AUD/USD is now staring down a rather uncomfortable date with its March lows. The question now is will buyers finally put their foot down or are we about to see another major leg lower in the currency pair?
We’re seeing price drop to around 0.6835 currently, putting the March lows at 0.6833 firmly in the spotlight. A firm break below that will see AUD/USD fall to its lowest levels since January, potentially opening the door for a push towards 0.6800 and below next.
After failing to sustain a recovery above 0.7000 at the end of last month, sellers have firmly regained control in AUD/USD. The pair has since broken back below its key daily moving averages and the rising trendline support from the March to June lows that had helped underpin the upside momentum since July.
That leaves the March low at 0.6833 as the next major line in the sand. Below that, the 0.6800 level comes into focus with little obvious technical support until the January trading region. The 100-week moving average at 0.6700 might offer buyers a place to lean on amid such a break lower next.
And looking at the fundamental backdrop, there isn’t much encouragement for the aussie either.
The dollar resurgence continues to gather momentum after hotter US inflation and more hawkish Fed remarks reinforced expectations for another rate hike in December. Meanwhile, the RBA looks to have moved to the sidelines after its latest move and that leaves the Fed being the one with the more immediate tightening bias.
And when you throw in a deteriorating risk mood with US futures turning sour again, it’s hardly the friendliest environment for the risk-sensitive aussie currency.
As such, what I’ll be watching now is whether sellers can secure a daily close below 0.6833. A brief dip could still invite some bargain hunting but a sustained break would strengthen the bearish case considerably.
As for buyers, reclaiming 0.6900 would be a first step towards stabilising sentiment. But until then, sellers look firmly in the driver’s seat and they could very well take the pair much lower in getting to their next destination.
This article was written by Justin Low at investinglive.com.