Bearish View

• Sell the AUD/USD pair and set a take-profit at 0.6350.
• Add a stop-loss at 0.6458.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 0.6420 and a take-profit at 0.6458.
• Add a stop-loss at 0.6350.

The AUD/USD is still sitting at its lowest level since November last year as concerns about Australian growth continued. The pair was trading at 0.6408 on Tuesday morning, where it has been at in the past few days. It has retreated by over 7% from the highest level in July.

Australia growth concerns

The Australian dollar has been under pressure in the past few weeks as investors fear about the economy. One of the biggest concerns is about China, the biggest trading partner.

Recent economic numbers have shown that the economy is slowing at its fastest pace in years. Most analysts believe that the real performance in the country is worse than what the official numbers say.

This slowdown will likely continue because the engine that powered China’s growth is running out of steam. For example, the real estate industry is slowing, pushing some of the biggest firms in the industry at risk of crashing.

Similarly, China does not have more large infrastructure projects to build. Most importantly, foreign direct investments (FDI) has slowed while manufacturing output has contracted.

Australia’s economy is also slowing as exports to China drop. And analysts believe that it will drop for a while because of an ageing population and lower population growth. This view was supported by the recent economic numbers in the country. For example, the labor market has started softening, with the unemployment rate rising to 3.7% in July.

The AUD/USD pair will still react to more of the happenings in China and the upcoming US existing home sales data. Economists expect these numbers to reveal that existing home sales dropped from 4.16 million in June to 4.15 million. Several Fed officials will talk on Tuesday ahead of the Jackon Hole Summit.

AUD/USD technical analysis

The AUD to USD pair has been in a strong bearish trend in the past few weeks. This decline saw it drop below the important support level at 0.6458, the lowest level on May 31st.

The pair has fallen below the 25-period and 50-period moving averages. Most importantly, it has formed a bearish pennant pattern. In price action analysis, this pattern is usually a bearish sign.

Therefore, the pair will likely have a bearish breakout in the coming days. The next reference level to watch will be at 0.6350.

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