AUD/USD falls to a low of 0.6915 on the day
Price is now hitting fresh lows since the January flash crash and there doesn’t look like there is much stopping the pair from further losses at this point.
Fundamentally, it hasn’t been a good day for the aussie as wages data was sluggish and Chinese economic data for April disappointed. Then, risk sentiment is now taking a weaker turn as equities are extending losses while Treasury yields are also falling further.
This is all contributing to an extended drop in the aussie and not forgetting there’s also election risk over the weekend to consider. All in all, things aren’t looking great for the currency and that’s reflected in the price action of AUD/USD and AUD/JPY this week.
For AUD/USD, price is now headed towards a test of the 0.6900 handle and the next line of support lies around there via bids and the 7 September 2015 low of 0.6896. Beyond that, it’s yet another slippery slope towards the January 2016 lows around 0.6827-40.
I reckon we’ll reach a point where traders will start to take profit off shorts should price start crossing below 0.6900 as short positions start to look stretched again. But given the fundamental picture as well as yields story, AUD/USD should continue to stay pressured in the bigger picture. As such, the name of the game remains to fade the rallies in the pair.