AUD/USD loses momentum ahead of 0.80, starts consolidating daily gains
|After losing nearly 100 pips and refreshing its 3-week low on Thursday, the AUD/USD pair was able to stage a modest recovery on Friday but failed to extend its gains above the critical 0.80 mark. As of writing, the pair was trading at 0.7972, gaining 0.5% on the day.
Although the greenback struggled to sustain its FOMC-led strength on Thursday, the pair dropped sharply after the aussie came under a heavy selling pressure on S&P's decision to downgrade China's, Australia's biggest trading partner, sovereign rating. "S&P cut China's credit rating by a notch to A+ with stable outlook. Back in May, Moody’s also cut China to A1 from Aa3, and both agencies warned of risks from rising debt loans. Note that all three agencies now line up with our own sovereign rating model," Marc Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, wrote in a recent report.
On the other hand, the US Dollar Index couldn't hold above the 92 mark on Friday as the falling US Treasury-bond yields continued to weigh on the greenback, allowing the pair to start retracing its losses. At the moment, the 10-year reference was down nearly 1% on the day while the DXY was losing 0.15% at 91.80. Furthermore, the data from the U.S. showed that the PMI data released by Markit came in below market expectations.
With no more data left in the remainder of the session, the pair is likely to stay calm below the 0.80 mark. Despite today's rebound, however, it's still looking to close the week with losses for the second time in a row.
Technical outlook
A weekly close below the 0.80 handle could bring back sellers and make it tough for the pair to rise decisively. Moreover, the RSI on the daily graph remains below the 50 mark, suggesting that the bulls are losing strength. On the downside, 0.7950 (50-DMA) could be seen as the first technical support ahead of 0.7900 (daily low/psychological level) and 0.7865 (Aug. 24 low). On the flip side, resistances align at 0.8000 (20-DMA/psychological level), 0.8090 (Sep. 20 high) and 0.8160 (May 14, 2015, high).
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