AUD/USD Descending Triangle Pattern in Play – Traders Brace for Breakout!
Arslan Butt • 3 min read
The AUD/USD pair closed at 0.71604, after placing a high of 0.72157 and a low of 0.71391. Overall, the movement of the AUD/USD pair remained bearish throughout the day. The currency pair was declining on Friday, amid the increased uncertainty in the market and the increasing strength of the US dollar.
At 04:00 GMT, the Flash Manufacturing PMI figures for August were released, showing a decline to 53.9, from July’s 54.0, and this weighed on the Aussie. The Flash Services PMI in August also declined, dropping to 48.1 from the previous month’s 58.2, which also weighed on the Aussie. At 06:30 GMT, the Retail Sales figures for June showed a rise to 3.3% from 2.7% in May. The weak Australian Dollar, due to poorer macroeconomic data compared to previous figures, pulled the AUD/USD pair down, and it started posting losses. The Australian Manufacturing and Services Sector reported contraction in August, compared to the previous month’s figures, weighing on the local currency.
On the US Side, the US Dollar Index rose by 0.5% on Friday, heading towards the 93.5 level, and keeping the US dollar in demand. The rising PMI data added strength to the US dollar, with the Flash Manufacturing PMI going up to 53.6, compared to the anticipated 51.9, and the Flash Services PMI rising to 54.8, compared to 50.9. Both PMIs came in favor of the US dollar, showing an expansion in the US Manufacturing and Services sector in August.
AT 19:00 GMT, the Existing Home Sales from the US for July, also rose to 5.86M, against the expected 5.40M, lending support to the US dollar, which in turn put further pressure on the AUD/USD pair on Friday.
The China-proxy Aussie was also under pressure on Friday, as the tensions between China and the US escalated. The China Banking and Insurance Regulatory Commission (CBIRC) issued a firm challenge to the US, stating that US actions to weaken financial stability in Hong Kong would not only affect the Chinese people, but that it would also have consequences for the people of the world, including the Americans themselves. They advised the US that if it continues to act unilaterally, it will only shoot itself on foot.
The Chairman of CBIRC, Guo Shuqing, claimed that the recent move by the US to put domestic laws above international laws was illegal and that it violated the principles of the market economy. Furthermore, in response to a statement made by Gao Feng, a spokesman of the Chinese Commerce Ministry, claiming that the US and China would soon hold a meeting, in order to discuss the Phase 1 trade deal, the US Administration refused to confirm that there were any plans to meet China over the Phase 1 deal. This raised tensions between the two countries further.
On Friday, US President Donald Trump said that, should he win the next elections, he would fully end the country’s reliance on China. He added that he would improve the American manufacturing independence and bring the critical supply chains home, merely to put a permanent stop to the home country’s reliance on China.
These statements by Trump have angered China, and investors are awaiting a response. However, the increased uncertainty and safe-haven appeal weighed heavily on the Aussie, which is perceived as risky, causing it to fall on Friday, posting losses against the US dollar.
Daily Technical Levels
Pivot point: 0.7161
The AUD/USD currency pair is trading at 0.7169, holding above the support level of 0.7137. Above this level, the pair could remain bullish until the 0.7215 level. Continuation of an upward trend and violation of a 0.7215 resistance could open further buying room until the 0.7275 level. Conversely, below 0.7137, the AUD/USD pair could slip until the 0.7190 level. Sideways trading is expected today. Good luck!