• The recent escalation in the US-China continues to weigh on the Australian Dollar.
• Larger than expected rise in Aussie unemployment rates exert additional pressure.
• A subdued USD price action helped limit further losses amid oversold conditions.
The AUD/USD pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow trading band, just above the 0.6900 handle, or 4-1/2 month lows.
The pair extended its recent bearish trajectory and lost some additional ground in reaction to a larger-than-expected rise in Australia’s unemployment rate, which jumped to an eight-month high level of 5.2% in April. Adding to this, the previous month’s reading was also revised higher to 5.1% from 5.0% and full-time employment dipped by 6.3K, boosting odds of an interest rate cut by the RBA.
Against the backdrop of the recent escalation in the US-China trade tensions and renewed worries over slowing economic growth in China, the data kept exerting downward pressure on the China-proxy Australian Dollar. This coupled with the prevailing cautions mood further drove flows away from perceived riskier currencies – like the Aussie and dragged the pair back below the 0.6900 round figure mark – levels not seen since early January.
Meanwhile, a subdued US Dollar price action, weighed down by a follow-through slide in the US Treasury bond yields helped ease the bearish pressure and assisted the pair to recover around 20-pips from daily lows amid near-term oversold conditions.
Moving ahead, Thursday’s US economic docket – featuring the second-tier releases of housing market data, the usual initial weekly jobless claims and Philly Fed Manufacturing Index, might contribute towards producing some short-term trading opportunities later during the early North-American session.
Technical levels to watch
As Yohay Elam, FXStreet’s own Analyst explains: “The Technical Confluences Indicator shows that AUD/USD may find support around 0.6898 where we see the convergence of the Bollinger Gand one-day Lower, the Pivot Point one-day Support 2, and PP one-week S2. The next cushion is somewhat weaker at 0.6865 where the PP one-month S1 awaits.”
“Looking up, resistance is quite substantial. Initial resistance awaits at 0.6930 which is the confluence of the Fibonacci 38.2% one-day and the Simple Moving Average 10-4h. The most significant cap is close. At 0.6948 we see a dense cluster including the BB 4h-Middle, the PP one-day R1, the PP one-week S1, and the previous daily high,” he added further.