AUD/USD Heading South for Bearish Correction – Quick Trade Idea!
Arslan Butt • 2 min read
The AUD/USD pair closed at 0.70985, after placing a high of 0.71615 and a low of 0.70901. Overall the movement of the AUD/USD pair remained bearish throughout the day. The AUD/USD pair broke its 4-day bullish streak on Thursday and started to decline, despite the weakness of the broad-based US dollar. On Thursday, the Aussie pair flashed its first negative daily close for the week, as market sentiment soured. However, the broad-based weakness in the US dollar gave pair sellers a good fight.
Although the US Dollar Index remained on the back foot around early March lows, the AUD/USD pair failed to continue its bullish stance and started to decline on Thursday. The reason could be attributed to the first negative closing of the Wall Street Journal, after a four-day winning streak. This also triggered a drop in the 10-year TIPS yield, by 0.907%, resulting in the risk-averse mode.
The risk-off market sentiment was further boosted after the escalation in US-China tensions. The US ordered China to close its consulate in Houston within 72 hours, amid accusations of spying. China’s foreign ministry condemned this move, calling it a political provocation. It also resulted in a drop in AUD/USD pair prices on Thursday.
Another factor that affected the risk-off market sentiment and the weakness of the Aussie, which is perceived as risky, was the record-high increase in the number of coronavirus cases in the US. Cases of the virus reported from the States reached the 4 million mark on Thursday, with an average of over 2,600 new cases – the highest rate in the world. The death toll in the US has reached 143,000, a fact that raised concerns regarding the recovery of the world’s largest economy, weighing on both risk appetite and the Australian dollar.
On the data front, the NAB Quarterly Business Confidence from Australia reached -15 in June, and from the US side, the unemployment claims reached 1.4 M, against the expected 1.3 M, weighing on the US dollar. The weak US dollar kept a check on additional losses in the AUD/USD pair on Thursday.
On Friday, traders will keep a close eye on the PMI data from Australia and the United States, for fresh impetus. US President Donald Trump’s speech will also be a key event to watch.
Daily Technical levels
Pivot point: 0.7117
The AUD/USD is trying to complete a bearish correction to 61.8% Fibonacci support at the 0.7050 level. Below this, the next support could remain at levels around 0.7028. The resistance is holding steady between the 0.7100 and 0.7132 levels. Bearish bias seems dominant today, so let’s consider capturing selling trades. Good luck!