- Risk sentiment turns sour amid weaker stocks and Yuan, drags Aussie lower.
- A test of 0.7000 inevitable on upbeat US growth numbers for Q3.
The declines in the AUD/USD accelerated on a breach of the key support near 0.7050/40 area, as the stop got triggered below the last, opening floors for a test of the 0.70 handle.
The spot fell further and hit the lowest levels since February 2016 near 0.7030 as the risk-off sentiment seeped back into Asia, with the Asian equities back in the red and S&P 500 futures resuming the recent declines, both losing 1% so far.
Moreover, the weakness in the Yuan versus the US dollar amid looming US-China trade concerns and risks to the Chinese economic growth also collaborated to the latest leg down in the Aussie. The USD/CNY cross is seen heading for a test of 10-year highs of 6.9651, having hit daily tops at 6.9642, fresh 22-month tops. The Aussie is seen as the proxy for the Chinese economy.
In the day ahead, the major could test the 0.7000 level should the US Q3 advance GDP figures better expectations, which is likely to offer fresh legs to the recent USD rally.
AUD/USD Technical levels
Resistance: 0.7083 (daily top), 0.7100 (round number), 0.7160 (Oct. 17 high).
Support: 0.7000 (key support), 0.6950 (psychological level), 0.6975 (Feb 2016 low).