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AUD/USD steadies after yesterday’s drop but remains in a vulnerable spot

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AUD/USD fell to its lowest levels since November last year yesterday

AUD/USD D1 18-08
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I haven’t been a big fan of the aussie for quite a while now as it has been on the receiving end of the divergence trade in the FX space over past month-and-a-half, and the latest technical change isn’t going to help to convince me otherwise.

The break below 0.7300 in AUD/USD to fresh lows for the year yesterday underscores the negative sentiment in the aussie as of late, with the virus situation not getting any better and vaccinations are still some ways off from desirable levels.

Adding to that is the RBA minutes this week revealing that policymakers may delay the taper timeline if the health crisis worsens, which is pretty much what is happening.

From a technical perspective, the aussie is sitting in rather vulnerable spot against the dollar now on the break below 0.7300 yesterday.

There is some minor support seen around 0.7223, which coincides with the 200-week moving average at 0.7222 so perhaps that may help to limit downside momentum for the time being. But break below that and a slippery slope beckons for the pair.

The 100-week moving average is seen at 0.7137 next but there is pretty much little else in the way of a bigger drop towards 0.7000 and therein lies the risks for the aussie.

The FX space is very much trading based on the virus/policy divergence right now and the aussie is arguably the laggard at the moment – in terms of sentiment anyway.



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