AUD / USD falls below 0.7300 reflecting the stock markets decline

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  • AUD / USD has fallen below 0.7300 amid falling US equity markets and weak retail sales data.
  • After failing to break above 0.7340, the upper bound of its recent range, further consolidation appears likely in the near term.

The pair AUD / USD has been on the defensive during the American session today, falling below the 0.7300 level. to set new lows for the day around 0.7290.

Mild US retail sales data and falling risk appetite weigh on AUD

Risk-sensitive currencies have had a fall along with US stocks in the wake of a bearish opening of the US stock markets, with the steepest decline in the AUD and NZD, which are now the worst performing G10 currencies on the day and trading approximately 0.4% lower on the day versus the American dollar.

Before the opening of the American session, the appetite for risk had already suffered an impact due to disappointing US retail sales figures Core retail sales grew at a slower-than-expected monthly rate of 0.3% in October (expected growth rate was 0.5%), as did underlying retail sales, growing at a rate of only 0.2% month-on-month versus expectations of a 0.6% growth rate.

The recent underperformance of the Aussie marks a big turnaround since the beginning of the session. AUD / USD tested monthly highs during the European session at 0.7340 and it was one of the best-performing G10 currencies, amid the strength of the renminbi and RBA minutes that strongly reiterated that the central bank does not expect rates to turn negative any time soon.

AUD / USD breaks four-day uptrend, but buyers reappear with longer-term support

Having failed to break above its monthly highs at 0.7340 during the European session, the AUD / USD has proceeded to break down a recent four-day uptrend channel from the November 13 low (around 0.7220). However, the pair has quickly found decent buying interest around 0.7290, an area where a long-term uptrend resides, which has been in play as support and resistance since November 3.

If risk flows continue, however, a break below this trend support remains a possibility for AUD / USD, which would open the door to a more prolonged fall towards the lower limit of the pair range of the last 12 days at approximately 0.7220 (the high of November 3 and the low of November 13).

In this regard, the fact that AUD / USD has not broken above the upper bound of its recent range at 0.7340 means that, in the medium term, further consolidation within its recent range of 0.7220-0.7340 seems the most likely outcome.

AUD / USD 1 hour chart

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