AUD/USD sinks to new six-year low

<p>AUD/USD (daily chart shown below) briefly touched a new six-year low under 0.7300 on Thursday that was just slightly below the previous 0.7256 trough earlier […]</p>

AUD/USD (daily chart shown below) briefly touched a new six-year low under 0.7300 on Thursday that was just slightly below the previous 0.7256 trough earlier in the week. The currency pair closely approached the 0.7250 support level to the downside after a positive US GDP report on Thursday helped to lift the US dollar further. After touching the new low, AUD/USD quickly bounced but remained in consolidation just off its lows.

This new low is the latest culmination of a substantial slide from around the 0.7700 level that has plagued the currency pair for the past month, as the US dollar has persistently strengthened due to impending rate hike expectations. Also contributing significantly to the slide has been a plunge in commodity prices, especially gold, which are positively correlated with the Australian dollar and negatively correlated with the US dollar. From a broader perspective, AUD/USD has been trading within a clear bearish trend for over a year, since the 0.9500-area high in July of last year.

AUD/USD Daily Chart

 

Since last week’s plunge below the 0.7300 support target, AUD/USD has consolidated in a relatively tight trading range above and below this 0.7300 level, with the noted 0.7250-area serving as range support. Although the currency pair touched a new low on Thursday, it was only marginally below the previous low, and therefore should not be considered a true breakdown as of yet.

With continued US dollar strength fueled by Fed rate hike expectations as well as progressively lower gold prices, AUD/USD could very well be poised for further significant losses. With key short-term resistance around the 0.7350 level, which is around the top border of the noted trading range, any further downside momentum below the 0.7250 range support could pressure AUD/USD down towards the 0.7000 psychological support target.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.