The strength of the AUD is certainly falling, and this is further highlighted in the trading pair of AUD/USD as the USD has also taken a notable fall in recent times amid its own Covid-19 economy saving measures.
A number of factors have impacted the strength of the USD, but equally so, there are a few concerns for the AUD which include mixed Chinese inflation figures.
AUD/USD is trading under pressure, having turned south from daily highs of $0.7661 to $0.76 on mixed Chinese inflation figures and a cautious tone seen in the RBA’s Financial Stability Report (FSR).
The fall comes despite a weakening USD, which means the AUD is even weaker than the USD. China’s below-forecast CPI shows that post-pandemic recovery in China’s domestic consumption has not picked up the pace, which will affect the AUD since China is Australia’s biggest export client, explains PrimeXBT analyst Kim Chua.
While the AUD/USD has fallen to the $0.76 mark, the fear is that there is more to come and the pair could trade a lot closer to $0.70 rather than staying nearer the middle at $0.75. Based upon the issues in China and other geopolitical factors, a downward motion can be expected, but a deeper look at the charts show just how far the fall could be.
The daily chart is looking weak, with a head and shoulders breakdown at around $0.76 which could send the AUDUSD back down to $0.72.
With both the USD and AUD falling in tandem, the impact of this weakening needs to be seen relatively. The strength of both the currencies will be under pressure, as most of the world in this post-Covid-19 space, but the widening gap will be interesting to watch.
Kim Chua is an institutional trading specialist with a track record of success that extends across leading banks, including Deutsche Bank, China Merchants Bank, and more. Chua later launched a hedge fund that consistently achieved triple-digit returns for seven years. Chua is also an educator at heart who developed her own proprietary trading curriculum to pass her knowledge down to a new generation of analysts. Kim Chua actively follows both traditional and cryptocurrency markets closely and is eager to find future investment and trading opportunities as the two vastly different asset classes begin to converge.