- AUD/USD tumbled to the 0.7100 area from around 0.7200 on Thursday as risk appetite worsened following the ECB announcement.
- This meant new weekly lows for the pair which failed to get any lasting boost from this week’s RBA surprise.
- After breaking a medium-term uptrend, the pair is about to test its 21 DMA.
the australian dollar fell sharply on Thursday as risk appetite in the broader market worsened following the ECB’s monetary policy announcement (which weighed on European stocks) and amid a slide in industrial metals prices, with the Bloomberg Industrial Metals sub-index down around 2.0% on the day as traders watch for Covid-19 updates in China.
As a result, AUD/USD has tumbled almost 1.0% from above 0.7100 to fresh weekly lows around 0.7120 and is looking forward to testing its 21-day moving average around the 0.7100 level. Tuesday’s higher-than-expected RBA rate hike and more aggressive-than-expected RBA rate stance made the dollar’s rally short-lived.
Techs are likely to view the recent drop in AUD/USD as signaling the end of a bull run that had seen the pair rise more than 6.5% from multi-year lows at 0.6850 to last week’s highs above 0.7250. The main event for the rest of the week will be the US consumer price inflation report on Friday.
If data reveals that US price pressures have eased in May, AUD/USD could take a breather via 1) a weaker dollar as traders lower their Fed tightening bets ahead of next week’s meeting, and 2) through a likely improvement in risk appetite as inflation fears subside.
AUD/USD bulls expect US inflation to trend lower going forward, meaning a lasting drop in the dollar and improving risk appetite, which could see AUD/USD retrace its recent trend bullish. But for now, operators will probably want to keep their powder dry.
Technical levels
Source: Fx Street
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