AUD/USD plunged during the Asian day

AUD/USD

• The dollar traded mixed against its G10 counterparts during the European morning Thursday. It was higher against AUD and GBP, in that order, while it was lower against SEK and JPY. The greenback traded nearly unchanged against CAD, NZD, EUR, CHF, and NOK.

• AUD was the main loser during the European morning after a rise in the nation’s unemployment rate in June to 6.0% from an upwardly revised 5.9%. The jobless rate raised concern about its stalled economy and add to expectations that interest rates may remain on hold for months to come. Aussie weakened further when China, Australia’s biggest trade partner, reported lower than expected import data – thus weaker export data for Australia -- adding to the South Pacific nation’s losses. This confirms our bearish view on AUD, which is based on the idea that the slowdown in China will continue to erode Australia’s terms of trade and thereby weaken the AUD.

• The Swedish krona strengthened to the most in a week after the nation’s CPI rose by 0.2% yoy in June, a rebound from deflation of -0.2% yoy. The figure was better than the forecast of a rise to a 0.0%, easing some of the concerns about deflation. USD/SEK and EUR/SEK declined at the release, with the latter approaching our support zone of 9.2100. Although the country exited deflationary conditions for the first time after five months, the rate is still far from the Riksbank’s 2% target and I would not expect the Bank to change its tone any time soon. As a result, I still expect the Krona to weaken and I would consider today’s rally as a renewed selling opportunity.

• AUD/USD plunged during the Asian day, after finding resistance at 0.9455 (R2), and continued declining during the European day, breaking below the 0.9380 barrier. I would expect such a break to trigger extensions towards the support zone of 0.9330 (S1) first, where a clear dip would confirm a forthcoming lower low and maybe target the key zone of 0.9300 (S2). In my view, the rate has the necessary momentum to continue its decline. The MACD just crossed below its signal line, and seems ready to enter its negative field, while the RSI fell below 50 and has more to go before signaling oversold conditions. As long as the rate is trading below the prior uptrend line, drawn from the lows of June 29th, I see a negative short-term picture.

• Support: 0.9330 (S1), 0.9300 (S2), 0.9235 (S3).

• Resistance: 0.9380 (R1), 0.9450 (R2), 0.9505 (R3).