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The AUD is Holding Up

Is the AUD/USD Running out of Steam?

Posted Tuesday, May 12, 2020 by
Rowan Crosby • 2 min read

As the economies of the world slowly start to reopen, the appetite for risk continues to grow, which is helping the likes of the AUD/USD.

However, it looks like the bears are slowly regaining control of the AUD/USD after the charts took a technical turn for the worst.

As we can see below, price is now making a lower high and has really run out of steam around that 0.6550 level, which is a bit of a worry for a couple of reasons.

Firstly, 0.6500 is a huge psychological level and that’s been the case in Australia for decades. There would be many investors and readers who feel that this would be ‘fair value’.

The second is that we have some key data coming out this week that won’t be pretty – and there is a good chance that the market needs to price this in ahead of times.

Jobs are the area of interest and the monthly report which is due out later in the week will be just as ugly as many other countries. However, the jobless rate might not spike as high as places such as the US because the Government has introduced a number of programs to help keep people employed. This should see the numbers look OK – but it still might be hiding the underlying truths.

As such, a big rally might not be on the cards for the Aussie, at least not a further rally from what we’ve already seen.

At the same time, we are also seeing some trade wars between Australia and China of tariffs on things like barley. This is a developing situation and will weigh on the Aussie going forward. China is looking to introduce tariffs on a range of Aussie exports and it is believed to be in response to the PM wanting an enquiry into China’s role in the COVID crisis. Next in line are imports of red meat.

We have to remember that China is Australia’s largest trading partner so this could be a big negative catalyst.


Key AUD/USD Levels

We’ve spoken about 0.6500, but the downside is where I’m most interested at the moment.

Price has twice bounced off 0.6400 and this is a really big support level at the moment. If that can break, then we are really looking at an extended fall.

Again, this isn’t always a bad thing, Economies love a low exchange rate, especially an export-based one. So if that happens it will be a positive. But it does suggest some inherent concerns about the future – namely China relations.

AUD/USD – 240min.
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