Aussie could continue to underperform following the latest market reactions
The
Aussie underperformed against the majority of the leading currencies
during Monday's trading session. The AUD/USD dropped lower from 0.7235
to 0.7205, down by 0.4%, after the Reserve Bank of Australia's (RBA)
deputy governor Guy Debelle commented that a weaker Aussie might be good
for the Australian economy.To get more news about
Debelle mentioned that the board is currently watching the
developments in the forex market. Although an intervention might not be
effective, a lower AUD exchange rate might be beneficial to the
Australian economy, he added. The crash in the AUD/USD pair in recent
weeks comes after the pair had rallied by over 1,700 pips over the past
six months.
The Aussie might continue to underperform against the
Greenback after the US Dollar went higher across board on Monday as the
number of Coronavirus cases increase in Europe and Australia. If the
risk-aversion continues, then the AUD/USD pair will likely drop lower
during the day.
At the moment, AUD/USD is trading below the 20-day
moving average and could close the day below the 20-day moving average
of 0.7196. A breakdown of this critical technical barrier will increase
the possibility of changing the medium-term trend of the pair from
bullish to bearish.
Analysts and market participants will be
eagerly awaiting the commentary from Fed Chair Powell due later this
week as it might slow down the Greenback with talks of more monetary
intervention from the Fed. If that happens, then the Aussie might get a
breather, and the AUD/USD pair might perform better. However, if the
upcoming release of global PMI data disappoints, then traders would
reignite risk-aversion, and that could see the AUD/USD plunge lower.
The AUD recorded losses against other leading currencies. The AUD/JPY
pair plummeted from 75.73 to 75.45, following the negative comments
from Debelle amid Tuesday's Asian session. The pair suffered its most
significant loss in two weeks on Monday as the global markets praised
the risk-aversion wave. AUD/JPY sharply fell from 76.221 to 75.609 on
Monday, and at the current rate, it could likely drop further over the
coming hours.
Traders are rushing to the Yen at the moment due to
the increasing talks regarding the national lockdowns in the UK and
Europe backed by the recent rise in Covid-19 cases in the region.
Furthermore, the US-China tension is another catalyst that could be
negatively affecting the Aussie as China is the largest customer of
Australia. The US Secretary of State, Mike Pompeo, recently thanked
France, Germany, and the UK for their joint effort in rejecting China's
claims in the South China Sea at the United Nations (UN). While the
event intensifies the rivalry between the US and China, China losing the
claims indirectly affects Australia and the Aussie.
The AUD/JPY
pair is in a bearish trend as it is currently trading below the 100-day
moving average. Further risk aversion in the market could see the pair
drop lower and likely approach the 200-day moving average of 72.9.
Following the recent market performance, the pair's 50-day SMA is at its
lowest since August 03, while bearish MACD signals for AUD/JPY indicate
further downside. The Aussie could really do with any good news at the
moment to help it shake off the bearish trends.
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