AUD/USD resumes bearish stance after rebound from new six-year low

<p>Despite having established a new six-year intraday low at 0.7215 early yesterday, AUD/USD quickly rebounded to close trading on Wednesday all the way up near […]</p>

Despite having established a new six-year intraday low at 0.7215 early yesterday, AUD/USD quickly rebounded to close trading on Wednesday all the way up near the 0.7400 level on a US dollar drop and a surge in gold. These market moves were caused in part by China devaluing its currency, which temporarily prompted turmoil in the global equity markets and renewed questions over the timing of a US Fed rate hike.

Thursday saw a slightly different story unfold, however, as the US dollar steadied and gold began to falter once again. This caused AUD/USD to trade down from Wednesday’s highs and begin to resume its longstanding bearish stance.

AUD/USD Daily Chart

 

Bounces and relief rallies notwithstanding, AUD/USD should continue to be pressured to the downside in the long-term in light of several different factors, including China’s apparently troubled economy, pervasive weakness in commodities, and the likely inevitability of near-future Fed tightening that should further strengthen the US dollar.

Having just spiked down to hit a new six-year low on Wednesday, AUD/USD is still trading within a consolidation near its extreme lows and well below both its 200-day and 50-day moving averages. The prevailing trend continues to be strongly bearish in line with both the short-term downtrend that has been in place for the past three months and the longer-term downtrend that extends back more than a year to the 0.9500-area high in July of last year.

Any sustained re-break below 0.7300 should confirm the current bearish stance, with a major downside target around the key 0.7000 psychological level.

To the upside, any bounce or rebound should be met by strong resistance around the 0.7500 level.

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