- On Monday, the AUD/USD posted losses for the third consecutive trading session of 1.50%.
- A gloomy market mood and China’s Covid-19 zero tolerance policy are a headwind for AUD/USD.
- AUD/USD Price Forecast: To target 0.6500 once AUD/USD bears break 0.7000 level.
the australian dollar slumps to near two-year lows, last seen in July 2020, below 0.7000, amid a gloomy market mood. At the time of writing, the AUD/USD is trading at 0.6964.
Market sentiment remains negative as evidenced by US equities posting substantial losses amid a high yield environment for US Treasuries as traders question whether the Fed could address inflation without triggering a recession. Coupled with China’s ongoing Covid-19 crisis, which has already hit PMIs, and its exports added a pinch of salt to the already battered global economic slowdown. Furthermore, nerves between Ukraine and Russia remained in the background as market players await a resolution of the conflict.
Meanwhile, since the end of last week, the members of the Fed began to make statements. On Monday, Atlanta Fed President Raphael Bostic said he sees two or three 50bp hikes as a benchmark, but reiterated that he is open to adjustments. Bostic added that the risks are two-sided and the economy could take multiple paths. He said 75bp rate hikes are not his baseline, but he’s not taking anything off the table. The Atlanta Fed’s second-quarter GDPNow tracker cut US growth expectations from 2.0% to 1.8%.
On the Australian side, Consumer & Business Confidence, Retail Sales and the RBA’s Bullock speech could shed some clues on the Australian economy.
In the week ahead, the US economic docket would reveal retail sales on Tuesday, followed by inflation figures on Wednesday and consumer sentiment on Friday. With global economic growth threatening to be disrupted by China’s Covid-19 zero tolerance policy and central bank tightening, AUD/USD traders should be aware of the data mentioned above.
AUD/USD Price Forecast: Technical Outlook
AUD/USD is under severe downward pressure and once it broke below 0.7000, it opened the door for more losses. In the MACD histogram, although showing a positive divergence, the MACD line points lower, widening its distance from the signal line, further consolidating the bearish bias.
The first support for AUD/USD would be the June 2020 low around 0.6776. A break below would expose the May 2020 swing highs around 0.6616. Once broken, the next support would be 0.6500.
Technical levels
Source: Fx Street
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