AUD/USD Sideways Trading Continues – Brace for a Breakout!
Arslan Butt • 2 min read
The AUD/USD pair closed at 0.69458, after placing a high of 0.69975 and a low of 0.69217. Overall, the movement of the AUD/USD pair remained bearish throughout the day. After rising for six consecutive days, the AUD/USD pair dropped on Tuesday, posting losses on the day, mainly due to renewed lockdown restrictions in Australia, and the strength of the US dollar.
On Tuesday, the Reserve Bank of Australia kept its rates unchanged at 0.25%, and gave no indication that they would change them anytime soon. The board of the Central Bank held rates steady at a record low level, where they have been since late March. The rates were cut because of lockdowns in the economy, in order to stop the spread of the coronavirus.
While the lockdowns are easing all over the world, the Australian state of Victoria went back into lockdown, due to an increasing number of COVID-19 cases. On Monday, 191 new cases of virus-infected patients were reported from the state – the highest for one day since the start of the pandemic.
Melburnians have been confined to their homes for the second time, only being allowed to leave their homes for grocery shopping, caregiving, daily exercise and school or work, as Premier Daniel Andrews said on Tuesday. He said that the stage-three restrictions will come into effect from Tuesday at 11:59 pm and will remain in place for the next six weeks. The renewed lockdown in Australia weighed heavily on the Australian dollar and the AUD/USD pair dropped for the day.
On the data front, at 3:30 GMT, the AIG Services Index for June came in at 31.5, compared to the 31.6 recorded for April, weighing on the Aussie. The decreased services index from Australia indicated a contraction in the services industry, dragging the AUD/USD pair with it.
On the US dollar front, the USD was strong across the board, due to the release of the JOLTS Job Openings data from the US at 19:00 GMT. It showed that there were 5.4M jobs open in May, compared to the expected 4.7M, lending support to the US dollar, thereby exerting further downward pressure on the AUD/USD pair.
Daily Technical Levels
Pivot point: 0.6962
The AUD/USD pair has dropped sharply, falling below the 0.6980 level, to 0.6920. The AUD/USD can find support at the 0.6920 level, which is extended by the 50 periods EMA on the 4-hour chart. The MACD and RSI are now moving into the selling zone, suggesting the odds of selling trends, but we need to wait for the market to complete retracement before taking a bullish reversal. The 38.2% Fibo level may provide support at the 0.6920 level today. Let’s consider taking a sell below 0.6920 and buying above the same level today. Good luck!