AUD / USD stabilizes below 0.7100, ends the week with a drop of more than 150 pips

• The Australian dollar is among the worst performers of the week, hit by RBA expectations.
• AUD / USD unable to rally to the lowest close since September 28.

The pair AUD/USD it traded sideways on Friday, consolidating a weekly loss of more than 150 pips. The US dollar weakened amid an improvement in risk sentiment, but the Aussie still failed to make a recovery.

The Australian dollar was the worst performer among the G10 currencies for the week. “The AUD has been undermined over the past week by raising expectations of further easing of the RBA next month and the widespread deterioration in risk sentiment,” explained MUFG Bank analysts. They note that the Australian dollar remains one of the G10 currencies most sensitive to stock market performance.

At MUFG Bank, analysts see a limited decline considering an improvement in China’s economic performance. They also noted that the Australian dollar could “from expectations about a Blue Wave in the US elections. It would open the door to a more significant US fiscal stimulus that supports global growth and a possible reduction in trade tensions between the United States and China. ”

Technical perspective

The weekly chart shows AUD / USD above the 20-week moving average, with a current pattern of slow movements to the upside and sharp declines. The bias points to the downside with key support at the 20-week moving average around 0.7070 and then at the 0.7000 area; a break to the downside should increase the downward pressure.

If AUD / USD manages to stay above 0.7100 over the next week, the Aussie could ease the pressure, but it needs to break above 0.7220 / 40 to nullify the current negative bias.