AUDUSD fell to its 3-month lows yesterday as risk aversion continued to dictate trading. The currency pair bottomed at 0.6699 before closing the day at 0.6719, 31 pips below its opening price.
Coronavirus Continues to Weigh Down on Sentiment
The Australian dollar has been heavily-hit by risk aversion. Fears surrounding the coronavirus have continued to mount. As of this writing, there are 9,776 confirmed cases and the death toll has risen to 213 (from 130 yesterday). The World Health Organization (WHO) has declared the outbreak as a “global health emergency.” Consequently, this declaration has fueled panic among the public and investors alike.
Chinese PMI Reports Released Today
Data from Australia’s largest trading partner also did very little to help the Aussie. The manufacturing PMI report for January came in lower at 50.0 than the expected reading of 50.1. On the other hand, the non-manufacturing PMI topped the 53.1 forecast at 54.1. AUDUSD rose to 0.6728 following the release but quickly fell to 0.6708 a couple of hours after.
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AUDUSD Outlook
On the daily time frame, we can see that AUDUSD is currently testing the 0.6700 handle were it bottomed on July to September 2019. Could today’s Chinese data be enough for AUDUSD to find bids at this level once again? A reversal candle in the form of a doji, hammer, or bullish engulfing pattern would be needed for confirmation. Bullish candlesticks materializing around this level may signal that the currency pair could soon rally to the 100 SMA around 0.6835.
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On the other hand, on the hourly time frame, we can see that AUDUSD is on a short-term downtrend. By connecting the highs of January 29 and January 30, the currency pair is finding resistance at the falling trend line. The recent consolidation even looks to have completed a bearish flag chart pattern on AUDUSD. In forex trading, a downside break below the consolidation at 0.6700 could trigger a sell-off. If this happens, the next floor for AUDUSD could be around 0.6260 where it bottomed on February 2009.More content
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