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Market News The Australian dollar fell to an eight-month low and is expected to fall further
The Australian dollar fell to an eight-month low and is expected to fall further
On July 20, the Australian dollar fell against the US dollar for the fourth consecutive day, falling to an eight-month low. The market outlook is likely to fall further.
2021-07-21
6600
On Tuesday (July 20), the Australian dollar fell against the US dollar for the fourth consecutive day, falling to near an 8-month low. Fears that the rapidly spreading delta strain will damage the global economic recovery intensify the impact on global risk sentiment. This can be seen from the downturn in the stock market, providing a strong impetus for the rise of the safe-haven currency, the dollar. In addition, the extended blockade of Sydney and Victoria, Australia's two most populous cities, has further pushed funds away from the risky Australian dollar.
The minutes of the RBA’s July 5 regular meeting reiterated the central bank’s basic position that the economy does not meet the conditions for raising interest rates before 2024. In other central bank events, the People's Bank of China maintained the one-year and five-year loan preferential interest rates (LPR) at around 3.85% and 4.65%, respectively, which had little impact on the Australian dollar. In the absence of any major economic data affecting the market in the United States, the market’s hedging impulse will continue to play a key role in influencing major markets and creating meaningful trading opportunities.
At the same time, the overnight fall in U.S. Treasury yields intensified global risk aversion. Coupled with the decline in the probability of the Fed taking immediate action in the short term, the benchmark 10-year U.S. Treasury yield fell to a low of more than five months. In fact, the Federal Reserve Federal Funds futures show that the possibility that the Fed will raise interest rates by 25 basis points in December 2022 will drop from 90% on July 13 to 58% on Monday, while the possibility that the Fed will raise interest rates in January 2023 From 100% last Tuesday to 70%. In addition, the difference between the 10-year and 2-year bond yields is still close to the February low, showing doubts about the prospects for economic growth. This should continue to be the driving force for the dollar and support the prospect of further depreciation of the dollar in the short term.
Technically, the overnight decline confirmed that it fell below the 0.6990-0.8008 strong 61.8% Fibonacci retracement level of 0.7377. However, the daily RSI has been oversold and bearish traders should remain cautious. Therefore, it is prudent to wait for a short-term consolidation or a mild rebound before betting on its further decline. However, the exchange rate still faces the risk of further falling below the 0.7300 mark and testing the 0.7270 level area. Some follow-up selling may drag the exchange rate down further to the next important support near 0.7230 and the 0.7200 integer mark.
On the other hand, any meaningful attempt to rebound will be regarded as a short-selling opportunity and will still be blocked near the breakout point of the 61.8% Fibonacci retracement level. The above resistance is close to the 0.7385 area. Immediately after the 0.7400 mark, if it breaks, it will trigger some short covering market. After that, the exchange rate will break through the short-term resistance of 0.7425 and strive to recover the key psychological barrier of 0.75. The latter coincides with the 50% Fibonacci retracement level and should constitute a pivot point for bullish traders.
(Australian dollar against the dollar daily chart)
The minutes of the RBA’s July 5 regular meeting reiterated the central bank’s basic position that the economy does not meet the conditions for raising interest rates before 2024. In other central bank events, the People's Bank of China maintained the one-year and five-year loan preferential interest rates (LPR) at around 3.85% and 4.65%, respectively, which had little impact on the Australian dollar. In the absence of any major economic data affecting the market in the United States, the market’s hedging impulse will continue to play a key role in influencing major markets and creating meaningful trading opportunities.
At the same time, the overnight fall in U.S. Treasury yields intensified global risk aversion. Coupled with the decline in the probability of the Fed taking immediate action in the short term, the benchmark 10-year U.S. Treasury yield fell to a low of more than five months. In fact, the Federal Reserve Federal Funds futures show that the possibility that the Fed will raise interest rates by 25 basis points in December 2022 will drop from 90% on July 13 to 58% on Monday, while the possibility that the Fed will raise interest rates in January 2023 From 100% last Tuesday to 70%. In addition, the difference between the 10-year and 2-year bond yields is still close to the February low, showing doubts about the prospects for economic growth. This should continue to be the driving force for the dollar and support the prospect of further depreciation of the dollar in the short term.
AUD/USD technical analysis
Technically, the overnight decline confirmed that it fell below the 0.6990-0.8008 strong 61.8% Fibonacci retracement level of 0.7377. However, the daily RSI has been oversold and bearish traders should remain cautious. Therefore, it is prudent to wait for a short-term consolidation or a mild rebound before betting on its further decline. However, the exchange rate still faces the risk of further falling below the 0.7300 mark and testing the 0.7270 level area. Some follow-up selling may drag the exchange rate down further to the next important support near 0.7230 and the 0.7200 integer mark.
On the other hand, any meaningful attempt to rebound will be regarded as a short-selling opportunity and will still be blocked near the breakout point of the 61.8% Fibonacci retracement level. The above resistance is close to the 0.7385 area. Immediately after the 0.7400 mark, if it breaks, it will trigger some short covering market. After that, the exchange rate will break through the short-term resistance of 0.7425 and strive to recover the key psychological barrier of 0.75. The latter coincides with the 50% Fibonacci retracement level and should constitute a pivot point for bullish traders.
(Australian dollar against the dollar daily chart)
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