#AUDUSD Forex Signal: Aussie Sell-Off Has More Room to Run (23 AUGUST 2022)
The pair will likely continue falling as sellers target the next support at 0.6800, which is slightly below the 23.6% retracement level.
Bearish view
- Sell the AUD/USD pair and set a take-profit at 0.6800.
- Add a stop-loss at 0.6900.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 0.6900 and a take-profit at 0.7000.
- Add a stop-loss at 0.6800.
The AUD/USD price slipped to the lowest level since July 19 as worries about the Chinese economy escalated. The pair also crashed as the US dollar made a spectacular comeback. It dropped to a low of 0.6868, which was lower than this month’s high of 0.7135.
Recession risks
The AUD/USD price declined as investors continued to worry about the rising risks of a recession in China and around the world. On Monday, China’s central bank decided to slash interest rates in a bid to support the ailing economy.
This decision came a week after the bank lowered two key interest rates after the weak retail sales and industrial production data. Additional reports showed that the country’s real estate sector, which accounts for a third of GDP was struggling. Country Garden, the biggest property developer said that its profit fell by 70% in the first half of the year.
As a result, there are concerns that the slowdown in China will have an impact on the global economy. This, in turn, has led to a sharp decline of most commodities like copper, crude oil, and iron ore. The Australian dollar is often seen as a proxy for commodities.
The AUD/USD pair sell-off continued after last week’s minutes by the Federal Reserve. The minutes showed that the bank’s officials were committed to continuing with the tightening process in a bid to fight the rising inflation.
While inflation has declined slightly, most Fed speakers have said that higher rates are necessary. As a result, the yield of the 10-year Treasury yield rose to 3.027% while the 30-year rose to 3.23%. At the same time, the VIX index jumped by over 17% while the US dollar index jumped to $109. The pair will next react to the latest US new home sales data and flash PMI numbers.
AUD/USD forecast
The four-hour chart shows that the AUD/USD pair has been in a strong bearish trend in the past few days. This sell-off accelerated when the pair moved below the important support level at 0.7048, which was the highest point on August 1. It managed to move below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has moved slightly above the oversold level.
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