AUDUSD Crumbling Like the Roman Empire - More Losses Possible if .7700 Gives Way

My colleague Chris Tedder discussed the fundamental drivers for the big drop in AUDUSD during today’s Asian session, but the pair is moving so fast that it’s worth updating some of the key technical levels to watch. After a strangely delayed reaction to yesterday morning’s dovish article by RBA watcher Terry McCrann, the Australian dollar is falling in earnest heading into today’s US session. Like the Roman Empire, there have been cracks in the Australian dollar’s edifice for years (prominently including an overreliance on the mining industry and China, as well as a potential property bubble) and now traders are starting to fear that the chickens may finally be coming home to roost.

With today’s selloff, AUDUSD has now broken conclusively below the 61.8% Fibonacci retracement of the entire 2008-2011 rally at .7950, leaving little in the way of significant long-term support nearby. At the same time, the weekly MACD indicator continues to trend lower beneath its signal line and the “0” level, showing strongly bearish medium-term momentum. The weekly RSI indicator is clearly oversold, but it’s important to note that an oversold oscillator is expected in a strongly trending market and not an indication of imminent reversal back higher.

From here, AUDUSD bears may look to target the minor low at .7700 from back in July 2009, but if that floor breaks, a move down toward psychological support at .7500 or lower could be in play. The longer-term picture looks very dour for the bulls as long as rates remain below key psychological support at .8000 and the 10-week moving average around .8150.