Sellers were looking for a reason to get back in and they got them yesterday and today
The Australian dollar just can't get off the floor no matter what the circumstance is. If it's not the RBA, it's poor economic data, and if not there's China trade issues. One way or another, the headwinds faced by the aussie remains at large and that is weighing on the currency heavily so far this year.
As for today, it's soggy economic data (here and here) that is weighing down the currency and AUD/USD is trading near session lows as we enter European trading. Near-term price action shows that sellers are favoured as price stays below the two key hourly moving averages and the overnight rebound fell short of testing the convergence of the 100 and 200-hour moving averages.
Since then, sellers were helped by poor data releases and price has moved back to test overnight lows near 0.7275. That has helped to stall the decline for the time being.
Looking at the bigger picture:
It's hard to argue that the trend since the start of the year has been to sell into any aussie rallies as the lower highs, lower lows pattern persisted all the way until June. Then, we had the consolidation before the sharp fall in early August before a retracement in price came about.
That retracement was met by resistance at the 1 June low @ 0.7373 and since then it's been another case of a steady track lower in the aussie - barring that one-day rebound due to the relief rally as Scott Morrison took over as PM.
With so much potential issues still plaguing the aussie and with the Fed set to hike rates further (yield spread divergence grows), I'm still favouring more downside play in the pair to come.
0.7200 will be the key level to eye in the near-term with barriers sitting at the figure level. But following that, the next key resistance region is the 0.7150-60 level from the June and December 2017 lows. Thereafter, it's a slippery slope for the pair and sellers will be watching towards 0.7000 as the next big level.
The real risk for AUD/USD shorts is a collapse in the dollar. And with the greenback itself potentially facing some headwinds as the midterms draw nearer, shorting the aussie against other currencies may be more attractive propositions. If the dollar is to falter, I'd look towards the yen as being one of the potential main beneficiaries - particularly if the dollar loses out due to risk events.
