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AUD / USD falls back to 0.7300 amid Evergrande’s inability to pay a dollar-denominated bond

  • AUD / USD struggles at 0.7300 as the market mood is risk averse.
  • Evergrande’s failure to pay interest on its bonds weighs on the AUD.
  • Australian retail sales and building permits for August could give AUD / USD a further boost.

At the beginning of the Asian session, the Australian dollar was trading at daily highs around 0.7310, thanks to positive market sentiment, amid the aggressive attitude shown by the Federal Reserve in Wednesday’s monetary policy statement and the dot plot. However, Evergrande’s troubles and the non-payment of the dollar bond coupon shifted market sentiment towards risk aversion, thus benefiting the US dollar. At the time of writing, the AUD / USD is trading at 0.7253, posting a 0.56% loss for the day.

The Australian dollar is the most exposed to the problems of China – ING

According to ING, the Australian dollar is the currency most exposed to any spill from a possible Evergrande default. The reason is that Australia is the G10 country that depends the most on China. A collapse in the housing market would raise further concerns about demand in the iron ore market, leading to another sell-off in the price of the raw material.

That said, later in the next week in Australia, August retail sales and building permits on a month-over-month reading could be catalysts for the AUD / USD pair.

In addition, the US economic calendar is packed with data: Durable goods orders, consumer confidence for September, underlying monthly and yearly GDP figures, initial jobless claims for the week ending September 23, and ISM manufacturing readings for September.

AUD / USD Price Forecast: Technical Outlook
Daily chart

AUD / USD is trading at the midpoint of the day’s trading range.

The price action of the last two candles suggests that a layer of dark clouds or a bearish engulfing pattern could be forming. Either way, they both have bearish implications. The first is a weaker signal and will need confirmation. The second is a strong signal, although it will require a daily close below 0.7245 to confirm its validity.

In case of that result, the first support on the downside would be the September 20 low at 0.7219. A decisive breakout of the latter could expose the 2021 low at 0.7105.

The Relative Strength Index is at 43, heading down, supporting the downtrend

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