Shorting AUD/USD at the 50 Daily SMA, As the USD Retreat Seems to Be Exhausted

Skerdian Meta•Wednesday, October 11, 2023•2 min read

AUD/USD has been weakening in relation to the US dollar as commodity dollars have declined as a result of the stronger US currency and the significant pullbacks that China’s economy has been experiencing across a number of sectors this year. Following yet another downturn in Chinese Caixin services and manufacturing last week, which sent the pair below 0.63, AUD/USD started to slide again early last week after failing to break the resistance at 0.65 where the 50 SMA (yellow) was also standing on the daily chart.

But after the dive lower early last week, we saw a reversal by the middle of the week, and commodity currencies have shown persistence in recent days as the US has pulled back. Following the two days of decrease that saw the price drop below the range, there was a quick recovery that saw the price close the week 140 pips higher to 0.6445.

The sentiment has improved in markets which has allowed AUD/USD to recover from last week’s low, which it had briefly reached since November of last year. The recovery phase for the AUS has also been helped by the decline in the USD, which continues to remain weak, despite today’s higher PPI producer inflation report for September, as the daily chart above illustrates.

In the long run, the AUD/USD exchange rate remains negative despite the comeback, trading far below key moving averages and below a short-term declining trendline that has been driving the market lower since July. But if the bulls can break through the overhead resistance that runs from 0.6440 to 0.6460, the tides may flip to the bearish side pretty quickly.

The signs of a bearish reversal are increasing, as this pair is slightly lower today, showing exhaustion, while the Europ and the GBP continue to make gains. Despite that, the 50 daily SMA continues to provide resistance at the top, so we decided to open a long term sell AUD/USD signal right at the 50 SMA.

AUD/USD Live Chart

AUD/USD

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.