Bottom line: AUDUSD long term structure continues to remain bullish against 0.5505 lows print in March 2020. The currency has managed to take out critical past resistance around 0.7400 handle. It continues to remain vulnerable for a turn lower towards 0.6300, in the near term.
Fundamental Outlook:
Dow Jones had raised through 29200 levels over the last week before reversing sharply. The indice has dropped over -5.0% since then hitting 27200 lows today (futures). SPX500 has slipped over -6.0%, NASDAQ around -10.0%. It is alarming to note how quickly risk sentiment can change.
Global indices might remain under pressure over the next several weeks as risk aversion continues. The safe haven US Dollar and anti-risk Japanese Yen were seen to be the only beneficiaries. Investor sentiment might remain fragile as Asian Markets open today with Nikkei down over -1.50% already.
AUDUSD has also dropped below 0.7200 handle today and might continue further. The risk associated currency pair might remain under pressure as global equity markets turn lower. The exchange rate might face renewed selling pressure around 0.7300 handle.
Bitcoin has dropped close to -14.00% since the beginning of September 2020. The crypto has print lows around 9825 and might remain under pressure as the US Dollar strengthens. Investors might remain cautious as risk assets turn lower.
Technical Analysis:
AUDUSD has dropped to fresh intraday lows to 0.7186 levels before pulling back. The currency trades around 0.7215/20 mark as we prepare to publish, and might produce intraday counter trend rallies. It might remain well capped below 0.7413 resistance though.
AUDUSD has produced a religious uptrend after hitting lows around 0.5505 levels in March 2020. It has remained in control of bulls since then, and produced an impulse wave towards 0.7400 handle. As discussed earlier, an impulse wave is usually followed by a corrective wave in the opposite direction.
AUDUSD might be preparing to push lower towards 0.6300 handle in a corrective wave. The counter trend drop could reach fibonacci 0.618 retracement of the entire rally between 0.5505 and 0.7413 respectively. High probability remains for a bullish bounce thereafter.
Most traders might remain inclined to hold short positions taken around 0.7400 resistance zone. They might be also inclined to initiate fresh shorts at 0.7300/20 handle, which could act as short term resistance. A protective stop might go above 0.7430 mark while projected target towards 0.6330 levels respectively.
Prepared by
Harsh Japee, Technical Analyst.
AUDUSD Chart
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