AUDUSD Breaks Lower
As the week draws to a close the big winner has been the US Dollar. However, in the FX game, where there is a winner there is also, always, a loser. This week the weakest currency has been the Aussie with AUDUSD falling around 150 pips (2%). So, talking with other traders this week, there are plenty of people who were in on the move but, as is always the case, those who missed out on the move seem to be the most concerned with it. So, let’s walk through what happened and why this was a great trade.
What Caused the Move?
On the Aussie side of the trade, the main driver this week was news of fresh lockdowns in Australia. With the Delta variant increasing there, the Australian government as announced fresh stay-at-home measures, which now include four of the country’s capital cities and three other regions, affecting around 12 million people.
Given the economic toll of these lockdowns, the news has been met with heavy selling in the Aussie. This is mainly because traders now expect a less optimistic message from the RBA next week. While the RBA has been keen to stress caution in its outlook anyway, citing the residual downside risks around the pandemic, news of these lockdowns means the bank’s message is likely to be even more reserved, dampening any chance of an Aussie recovery in the near term.
In terms of US action, the Dollar has been surging higher following the June FOMC meeting. With 13 of the bank’s policymakers now projecting a rate hike as early as 2023, and with growth and inflation forecasts for the year ahead raised, the market is now focusing on tapering once again. The prospect of tightening this year has caused a sharp unwinding of USD positions which is driving the current USD rally. Given the policy divergence, or at least, divergence in policy expectations, between the Fed and RBA, the pair looks poised for further downside. Let’s take a look at the technical picture.
Technical Views
AUDUSD
The breakdown below the rising trend line in AUDUSD has seen the pair passing below seral key levels. With the pair having now broken below last week’s lows, and with MACD and RSI both turned lower, the pair is on course to test the .7413 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.