AUD/USD Forex Technical Analysis – In Position to Post New Low for the Year
News of a coronavirus variant potentially resistant to current vaccines drove investors out of the commodity-linked Australian Dollar and into the safety of the U.S. Dollar, Japanese Yen and Swiss Franc. We don’t know much about the new variant, but the fear of the unknown is powerful when dealing with matters of risk.
At 20:25 GMT, the AUD/USD is trading .7116, down 0.0073 or -1.02%.
One fear is that another coronavirus wave would encourage some countries to shut down parts of their economies. Certainly air travel, hotels and any other travel-related industry will take a hit. The 13% loss in crude oil is a sign that traders are taking this new development seriously.
The biggest concern is that hawkish central banks like the Fed and Reserve Bank of New Zealand (RBNZ) will pause their stimulus tapering and quest to raise interest rates. In Australia, the Reserve Bank (RBA) is already dovish, but a prolonged shutdown of its economy will push any thoughts of a rate hike well into the future.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through the August 20 main bottom at .7106 will reaffirm the downtrend. If this move creates enough downside momentum then look for an acceleration to the downside with the November 2, 2020 main bottom at .6991 the next target, followed closely by the July 16, 2020 main bottom at .6963.
On the upside, the nearest resistance is a series of minor retracement levels at .7242, .7272 and .7310.
One thing to consider early Monday is that the day after Thanksgiving is traditionally a low volume day with most of the major banks and institutions taking an extended break. This can amplify moves in the market.
That being said, it doesn’t change the bearish fundamentals driving the AUD/USD at this time. Essentially, the RBA is still dovish and the Fed is still likely to consider a faster tapering and a sooner-than-expected rate hike. This outlook won’t change until the Fed tells us the new variant will have a negative effect on the economy and jobs growth.