- The Australian dollar falls 0.92% on Monday amid a gloomy market mood.
- China’s coronavirus outbreak and the US central bank’s aggressive hawkish tilt prompted a flight into safe-haven assets.
- AUD/USD Price Forecast: The breakout of the 200 DMA opened the door for further AUD/USD weakness.
On Monday, the AUD/USD fell sharply amid a depressed trading day in financial markets, courtesy of China’s coronavirus outbreak that has spread to some districts of Beijing, threatening to slow down the world’s second-largest economy, and fears of a tightening aggressive Federal Reserve. At 0.7179, AUD/USD is down and about to post 0.94% losses.
Spread of coronavirus from China to Beijing could slow its economy, commodities fall
Market sentiment, as mentioned above, is keeping global equities under pressure, except for the tech-heavy Nasdaq Composite, which was up 0.42%. Additionally, commodities continue to move south amid growing China concerns, as oil, precious and base metals show losses. That also weighed on the pair as the Australian economy is heavily reliant on China. Additionally, iron ore prices posted losses of 12%, a headwind for AUD/USD.
Meanwhile, the dollar remains supported by growing bets that the Federal Reserve would raise rates by 50 bps, as shown by STIR, fully discounting a 0.50 hike. %. Mirroring this is the US Dollar Index, which rose 0.57% to 101.698.
On the data side, the Australian and US economic docket would have some Tier 1 data to release. The first quarter Consumer Price Index (CPI) will be revealed in Australia. On the other hand, US Gross Domestic Product (GDP) for the first quarter is expected to show some growth, but at a much slower pace than last year.
AUD/USD Price Forecast: Technical Outlook
AUD/USD broke several daily moving averages (DMAs) on its sharp decline, including the trend-setting 200 DMA found at 0.7291, denoting a bullish or bearish trend in an asset, according to the location of the price. It is worth noting that the Relative Strength Index (RSI) accelerated its downtrend but at 33.05, it still has room to spare in the event of further AUD/USD weakness.
Therefore, the first support for AUD/USD would be the 15th March cycle low at 0.7165. A break of the latter would expose the Apr 25 daily low at 0.7134, followed by the Feb 24 daily low at 0.7095.
Technical levels
Source: Fx Street
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