Australian Dollar Hurt by Dampened Risk Appetite; AUD/USD, AUD/CAD, AUD/SGD Price Setups - buzzfeed.work
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Australian Dollar Vs US Dollar, Canadian Dollar, Singapore Dollar – Price Setups:

  • A double top risk in AUD/USD as risk appetite scales back for now.
  • AUD/SGD threatens to break below a bearish triangle.
  • AUD/CAD drifts lower within a downtrend channel?

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A scaling back in risk appetite and an unexpected pause by the Reserve Bank of Australia (RBA) earlier in the week is weighing on the Australian dollar.

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Fitch’s downgrade of US credit rating and higher-for-longer rates following strong US private payroll data appears to be the recent catalysts for the setback in risk appetite. RBA delivered its second rate pause, contrary to expectations of a 25 basis-points hike, boosting the perception that Australia’s interest rates may have peaked, or at least moving to a data-dependent approach with regards to further tightening.

Meanwhile, markets are awaiting fresh stimulus from China targeted toward the ailing property sector. Beijing has announced a series of measures to cushion some of the downside risks to the economy, including cuts in key lending benchmarks, targeted measures toward new-energy vehicles, the property sector aimed at the supply side, and the booming generative artificial intelligence sector, and signaled the end of the years-long crackdown on the technology sector.For more discussion, see “Australian Dollar Surges on China Stimulus Pledge; AUD/USD, EUR/AUD, GBP/AUD Price Action,” published July 25.

Additional measures for the struggling property sector addressing the demand side and infrastructure could provide a floor to the deteriorating growth outlook. China is Australia’s largest two-way trading partner in goods and services. Any improvement in China’sgrowthoutlook bodes well for AUD prospects.

AUD/USD Daily Chart

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Chart Created by Manish Jaradi Using TradingView

AUD/USD: Looking vulnerable

On technical charts, AUD/USD is attempting to break below a vital floor at the end-June low of 0.6600, triggering a double top (the June and the July highs), potentially exposing the downside toward 0.6300. However, there is interim support on the lower edge of a declining trendline (at about 0.6375). A double top as a reversal pattern tends to be reliable, especially after a well-defined prior trend. However, in the current episode, the choppy/directionless price action since Q2-2023 raises the risk of undershooting the price objective of the pattern.

Any break below 0.6375-0.6450, roughly coinciding with the May low of 0.6450, could open the door toward the end-2022 low of 0.6170.

AUD/SGD Weekly Chart

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Chart Created by Manish Jaradi Using TradingView

AUD/SGD: Testing the line in the sand

Any break below a horizontal trendline from October, that comes in at about 0.8800, would trigger a breakout from a descending triangle. The upper edge of the triangle is a downtrend line from January. A breakout from the pattern could trigger a move of about 400 pips, based on the width of the pattern. Major support comes in at the 2020 low of 0.7980.

AUD/CAD Daily Chart

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Chart Created by Manish Jaradi Using TradingView

AUD/CAD: Drifting lower

AUD/CAD appears to be well guided within a downward-sloping channel from June, with initial support on the lower edge, now at about 0.8675. The lower-lows-lower-highs pattern since the start of 2023 raises the scope of a retest of the end-2023 low of 0.8600.

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— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish

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