Categories: Markets

AUD/USD poised to drop towards 0.7400

AUD/USD poised to drop towards 0.7400
  • The market mood is bearish, courtesy of high global yields, the Russia-Ukraine woes, and the Chinese coronavirus outbreak.
  • The Australian dollar is falling due to its status as a risk sensitive currency amid an absent economic docket.
  • AUD/USD Price Forecast: Remains Bullish, but Price Action and RSI Support Scenario for Further Bearish Extension Before Resuming Uptrend.

AUD starts the week off on the wrong foot, extending its losses to four consecutive days amid risk-off sentiment in the market. The Australian dollar’s weakening comes courtesy of rising global yields as global central banks look to tackle inflation amid a geopolitical crisis between Ukraine and Russia, which has caused energy prices to spike. At the time of writing, the AUD/USD is trading at 0.7426.

World Stocks Fall as Global Yields Rise; China reported more than 25,000 asymptomatic cases of Covid-19

Global stocks remained on the defensive overnight, while US equities further confirmed the gloomy mood, trading at a loss. The 10-year US Treasury yield is rising three basis points and at one point during the session pierced the March 2019 high at 2.77%, underpinning the dollar as the US dollar index gains 0.13%, currently at 99,969.

Apart from this, the crisis between Ukraine and Russia signals the continuation of hostilities, as the peace talks failed to provide a new and positive impetus. Ukrainian President Volodymir Zelenskyy said that they should not lose the possibility of a diplomatic solution to the war. At the same time, Minister Stefanishyna hopes that Ukraine will be granted the status of an EU candidate country in June, while stressing that Ukraine will quickly move forward with its application to join the EU.

Meanwhile, the US, UK, Germany and Slovakia will provide additional military equipment to Ukraine’s forces as a diplomatic end seems far from being achieved.

On the Russia front, President Putin is believed to have set himself four weeks to achieve a “sort of” victory in Ukraine before the big day of Russian victory on May 9.

China’s Covid-19 outbreak in the Shanghai and Guangzhou regions is another factor that weakened market sentiment. Shanghai reported 25,173 new asymptomatic cases on April 10, compared to just 914 symptomatic ones.

An absent Australian economic docket left the pair leaning on US economic data and market sentiment. On the US front, Fed spokespeople led by Regional Fed Chairs Bostic, Evans and Governor Bowman will make statements.

AUD/USD Price Forecast: Technical Outlook

AUD/USD pulled back below March 7 daily high at 0.7441, extending its decline from around 0.7600. The Relative Strength Index (RSI) at 50.5, due to its slope, looks poised to drop further. However, it is worth noting that the 50-day moving average (DMA) has just crossed the 200-DMA, each at 0.7309 and 0.7295, respectively, which means that the decline in AUD/USD is a decline that would resume the uptrend ahead.

That said, the first support for the AUD/USD would be 0.7400. A break of the latter would expose Mar 21 at 0.7373, followed by the 50 DMA at 0.7309.

Technical levels

Source: Fx Street