Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6300.
- Add a stop-loss at 0.6450.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6365 and a take-profit at 0.6425.
- Add a stop-loss at 0.6285.
The AUD/USD exchange rate made a bearish breakout and crashed to the lowest level since November as the greenback strength continued. The pair plunged to a low of 0.6335 on Thursday, much lower than the year-to-date high of 0.7153.
Risk-off sentiment remains
A risk-off sentiment has continued in the market this week. Data shows that fear and greed have moved to the extreme fear zone of 24. At the same time, the bond sell-off has continued, with the closely watched TLT ETF plunging to the lowest level since 2014.
American stocks have also plunged recently. The Nasdaq 100 index has dropped by over 8% from its highest point this year. The Russell 2000, Dow Jones, and the S&P 500 indices have all slipped sharply from their highest points.
Meanwhile, the US dollar index (DXY) has continued its upward trend. It has soared from the year-to-date low of $99.5 to over $106.7. The dollar has rallied against all other major currencies like the Swiss franc, sterling, and the euro.
The greenback has outperformed the Australian dollar because of the rising demand for the former. Also, investors believe that the American economy will have a stronger recovery than the Australian one.
Australia is more exposed to the happenings in China, where the economy is going through a major meltdown. Evergrande and Country Garden, the two biggest real estate companies in the country are on life support.
China is an important country for Australia since it buys most of its products like coal and iron ore. It is also a big buyer of Australian services like tourism and education. Therefore, a slowdown in China will have a major impact on Australia.
There will be no Australian economic data on Thursday. Therefore, the AUD/USD pair will react to the latest US GDP and jobless claims data.
AUD/USD technical analysis
The AUD/USD pair has been in a strong bearish trend in the past few months. It has remained below the 50-period and 25-period moving averages. On the daily chart, the pair also crashed below the key support at 0.6363, the lowest level in August and on September 8th. The Relative Strength Index (RSI) has moved below the neutral point of 50.
Therefore, the pair will likely continue falling as sellers target the key support level at 0.6300. A break below that level will bring 0.6250 into view.
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