- AUD/USD falls to a two-week low on Friday amid strong dollar-buying tracking.
- Risk aversion momentum puts additional bearish pressure on the risk sensitive Aussie.
- The bears are now waiting for a weakness below the monthly low before placing further bets.
The pair AUD/USD extends its recent sharp rejection of the technically significant 200-day SMA and moves lower for a fifth day in a row on Friday. The downward trajectory drags spot prices to a two-week low around the 0.6875 region during the mid-European session.
The US dollar continues its uptrend of the last week and a half or so and rises to a one-month high on the last day of the week. This turns out to be a key factor that continues to put downward pressure on the AUD/USD pair. In addition, recession fears are triggering a new wave of risk aversion globally and helping to drive flows away from the perceived riskier Aussie.
From a technical point of view, the acceptance below the 50% Fib retracement level of the July-Aug recovery move from the two-year low favors the bearish traders. The negative outlook is reinforced by bearish oscillators on the daily chart, which are still far from oversold territory. That said, failure to find acceptance below the 50-day SMA warrants some caution before positioning for a further drop.
Therefore, a follow-through of selling below the monthly low, around the 0.6870-0.6865 region, which coincides with the 61.8% Fibonacci level, is needed to confirm a further bearish breakout. The AUD/USD pair could then test the 0.6800 level and finally drop to the 0.6765 horizontal zone. The downtrend could extend towards the 0.6700 round figure on the way to the low for the year, around the 0.6680 region touched on July 14.
On the other hand, any significant recovery above the 50% Fibonacci level could be considered a selling opportunity and be capped near the overnight high around the 0.6970 area. The latter coincides with the 38.2% Fibonacci level and is followed by the key psychological level 0.7000. A convincing break of such barriers would nullify the short-term negative outlook and trigger a short-covering move.
AUD/USD daily chart
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Key levels to watch
Source: Fx Street
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