The pair will likely keep falling as traders target the next key support level at 0.7300 as the new wave continues in Australia.
Sell the AUD/USD and set a take-profit at 0.7300.
Add a stop-loss at 0.7440.
Timeline: 1 day.
Set a buy-stop at 0.7400 and a take-profit at 0.7480.
Add a stop-loss at 0.7350.
The AUD/USD pair retreated to the lowest level since December last year as Australia continued seeing a new wave of coronavirus. The pair fell to 0.7377, which is about 0.90% below the highest point on Friday.
New COVID Wave in Australia
Australia was one of the best-performing countries in terms of its COVID response in 2020. Now, the country is struggling as the new wave has forced it to move into a new phase of lockdowns in several states. The number of COVID cases in Sydney has kept rising. Similarly, New South Wales and Victoria states are considering tightening their borders to curtail the spread.
Therefore, traders are concerned that the new wave of the virus will have a negative impact on the economy. As a result, this could push the Reserve Bank of Australia (RBA) to move from being hawkish to dovish.
The AUD/USD is also falling because of the overall strong American economy. Last week, the US published strong economic numbers. Inflation rose to 5.4% while the number of people filing for initial jobless claims declined in the previous week. Data also showed that manufacturing activity jumped in June.
Further data published on Friday showed that the American consumer is doing well. Retail sales rose by 0.1% in June even as consumer prices rose to the highest level since 2018. Therefore, there is a possibility that the economy expanded by a large number in the second quarter since consumer spending is the biggest part of the economy.
Precisely, those polled by WSJ said that the economy expanded by 9.1% in the second quarter. They also expect that the economy has already moved above its pre-pandemic levels. Economists expect that the US will now move into a more moderate phase of expansion.
The AUD/USD pair declined sharply during the Asian session. It even moved below the important support level shown in blue. The pair has dropped below the 25-day and 15-day moving average (MA) while the Relative Strength Index (RSI) has dropped to the oversold level of 30. It is also below the dots of the Parabolic SAR indicator. Therefore, the pair will likely keep falling as traders target the next key support level at 0.7300 as the new wave continues in Australia. Still, there is a possibility that a relief rally to about 0.7425 will happen.