- Aussie sold-off into US-China trade spat, resurgent USD demand.
- Focus on US labor market report and risk sentiment for further impetus.
The offered tone around the Australian dollar keeps growing bigger, knocking-off the AUD/USD pair to fresh thirty-two month lows near the midpoint of the 0.70 handle, as better Australian retail sales data was outweighed by fresh US-China spat.
The declines in the Aussie are mainly driven by flaring trades tensions between the US and China, especially after the US Vice-President Mike Pence accused China of using its power in “more proactive and coercive ways to interfere in US national politics and politics.” The Aussie is considered a proxy for the Chinese economy.
Moreover, the renewed buying interest seen in the US dollar against its major peers also added to the weight on the major, as markets await the all-important US wage growth figure slated for release later today at 1230 GMT. Markets are expecting the US wages to edge lower in the month of September due to the negative impact of the hurricane.
A positive surprise in the wages would trigger a fresh rally in the US dollar alongside a rally in the Treasury yields, opening further downside risks for the Aussie.
AUD/USD Technical levels
According to Slobodan Drvenica at Windsor Brokers, “firm bearish setup of studies on all larger timeframes (day/week/month) adds to strong negative outlook. Bears eye psychological 0.7000 support as the sole obstacle en-route towards next strong supports at 0.6972 (09 Feb low) and 0.6910 (07 Sep 2015 low) which guard key longer-term support at 0.6825 (15 Jan 2016 low, the lowest since 2009). Bears show no signs of the stall so far, as slow stochastic continues to head south, deeply in the oversold territory, but corrective action could be anticipated in the near term. Upticks are expected to offer better selling opportunities and should be capped by falling 10SMA (0.7182).”
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