- A complete unwind of the two-year year-long reflation trade is possible as China stumbles.
- Technicals lean bearish, bears can have a look in at 0.7140 double bottom.
AUD/USD is making a minor recovery and testing the hid point of the .73 handle from lows of 0.7329 as the downtrend deteriorates a touch away from the support of the descending channel and yesterday’s lows (lowest levels since Jan 2017).
AUD/USD has been in a tailspin of dollar strength as investors pile into US Treasuries in a flight for safety in anticipation of a fallout in China, testing Mat’s triple lows and the 61.*% fibo of 2016/18’s rally at 0.7327. There is further downside potential in the yuan which is pressuring the Aussie and commodity-fx more broadly. At the same time, bets of an RBA hike have been pushed back over the horizon until later in 2019.
Downside potential for AUD/USD towards 0.72 on a 12 mth view
“A re-evaluation in the market about the outlook for RBApolicy this year and a drop in risk appetite has also impacted the AUD in recent months. In view of our concerns about the impact of trade wars and in view of our expectations of steady RBA policy well into next year, we see further downside potential for AUD/USD towards 0.72 on a 12 mth view,” analysts at Rabobank argued.
AUD/USD levels
Technicals lean bearish, and a complete unwind of the two-year year-long reflation trade is possible as China stumbles, which opens risk to the 0.72 handle and lower for a look in at 0.7140 double bottom lows on a weekly basis. On the upside, the 10-D SMA is at 0.7395 while the 10-W SMA is located at 0.7517 through 0.7500 recent double bottom lows. A break of 0.7600 opens 0.7640 and then 0.7680 before the top of the channel where the 100-D SMA resides at 0.7709. However,
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