AUD/USD: Aussie extends free-fall to a fresh 3-year low below 0.7000

• AUD/USD is trading down almost 1% at around 0.6980, the lowest level since February 2016.
• The slowdown in the economic activity in China sparks a fresh wave of the risk-off sentiment that supports safe havens like US Dollar.
• Further weakness on AUD/USD can be expected towards 0.6915.

The Australian Dollar is trading down near fresh three-year lows at the currency pair slipped below 0.7000 area for the first time since February 2016. A fresh wave of the US Dollar strength comes as a result of the unexpectedly sharp slowdown in the economic activity.

China’s manufacturing PMI decelerated to 49.7 in December falling into the contraction territory following the pattern of the state-run PMI survey that also slipped to contraction territory of 49.4 for December. The economic slowdown of the world’s second-largest economy sparked a new wave of pessimism with risk-off market sentiment ruling the FX market at the beginning of 2019.

With the Australian economy being closely related to China, any signs of Chinese economic slowdown is reflected immediately in lower Aussie Dollar.  

The AUD/USD breached major trendline support at the round big figure of 0.7000 and it is trending downside towards September 2015 low of 0.6900 and January 2016 low of 0.6827 next. On the upside, the next resistance on AUD/USD stands at a 5-day moving average of 0.7036. To build the upside potential, the AUD/USD needs to break above 200-day moving average of 0.7340.

Important technical levels to watch