Will the Double Top Unfold in AUD/USD Until Reaching 0.63?
The Australian dollar has been declining for around 5 weeks, being negatively impacted by the ongoing economic turmoil in China. After failing to push above 0.69 by the middle of July, AUD/USD has experienced a significant decline, dropping to 0.6360w. This marks the lowest level observed since November of 2022 when the USD turned quite weak.
The Australian economy has enjoyed substantial growth over the past decades, largely due to the robust demand originating from China. Historically, Australia has been a major supplier of commodities such as coal, iron ore, and copper to China, which makes the AUD a commodity currency, together with the NZD and the CAD to name a few.
However, present concerns have emerged due to the economic weakness in China. One notable sign of this is the distress in the real estate sector, which seems to be in great difficulty, highlighted by the bankruptcy filing of Evergrande, a colossal Chinese company in the United States. Adding to the turbulence, another significant player in the exceeding $200 billion, is also poised to undergo restructuring.
Looking from a technical standpoint, in Larger timeframe charts this pair tested the resistance at 0.69 twice earlier this year after retreating to 0.66, so a double top pattern has formed, with the neckline at around 0.66. Even when examined , the recent decline beneath the 0.6600 threshold, which solidified the bearish double-top breakdown pattern, reinforces the pessimistic short-term outlook for the AUD/USD currency pair, pointing to 0.63. So, we continue to remain bearish on this pair, and are selling retraces higher, following a similar trading strategy for other commodity currencies.
AUD/USD Live Chart
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