AUD/USD bulls sent packing, a break of 0.73 the figure on the cards

AUD/USD has been sent packing to the depths of the 0.73 handle in an extension of the downside from yesterday's closing highs in NY at 0.7409. AUD/USD has made a low of 0.7310 on the back of risk aversion where the Japnese Nikkei closed down 2.21%, copper at a three-month low and US equities unable to get off the floor. 

Metal prices have played havoc on the Aussie and iron ore prices are seen sliding even further according to a Reuters poll:

"Signs of a slowing Chinese economy and risks from steep tariffs brought in during a festering Sino-U.S. trade row will curb demand for steelmaking material iron ore, pushing down its price 13 percent in the second half of 2018, a Reuters poll showed."

- Reuters

Also, to note, AUD shorts have edged down having risen sharply the previous week according to the latest  CFTC positioning data. "Weaker than expected labour data and increasing US/China trade tensions have been contributing factors," analysts at Rabobank explained. 

For the week ahead, the RBA is up, but more attention could well be paid to retail sales given that it is pretty much a dead cert, 80% probability according to TD Securities, that the RBA will remain on hold:

"The market is placing a lot of focus on the Bank removing it is “more likely that the next move in the cash rate would be up, rather than down” from the June Minutes. We think too much emphasis is being placed on this omission for tomorrow's statement given this phrase has not featured in prior statements (only the Minutes). That said, the RBA commentary in the past month does suggest the Bank is likely to keep the cash rate on hold for longer than anticipated given muted wage pressures."

Chinese risk:

"Within Asia, it is very notable that the yuan is equal-weakest (with KRW), -3.4%, given China’s previous preference for appreciation. This of course raises the question of whether this is one of China’s responses to the ongoing trade battle with the US, ahead of the imposition of tariffs on $34bn of Chinese imports on 6 July," analysts at Westpac noted. 

AUD/USD levels

While the lows are holding in Chinese markets, there is still a risk of a complete unwind of the two-year year-long reflation trade as China stumbles, which opens risk to the 0.72 handle and lower for a look in at 0.7140 double bottom lows on a weekly basis. The May 2017 low (0.7328) has been broken and RSI has dipped into negative territory, below 30 on the hourly time frame. The 4hr stick's RSI is also embarking on the same as is the daily RSI. On the flipside, the 10-D SMA was pierced at 0.7380 is key while the 10-W SMA is located at 0.7495 just below 0.75 the figure and recent double bottom lows.