AUD/USD drops to two-week lows, seems vulnerable to slide further


  • AUD/USD came under renewed selling pressure on Tuesday after RBA Governor Lowe’s comments.
  • COVID-19 jitters, the selloff in iron ore prices exerted additional downward pressure on the aussie.
  • Bulls seemed unimpressed by a subdued USD price action as the focus remains on the US CPI report.

The AUD/USD pair extended its intraday descent heading into the European session and dropped to near two-week lows, around the 0.7330 region in the last hour.

The pair struggled to capitalize on the previous day's modest gains, instead met with fresh supply on Tuesday after the Reserve Bank of Australia Governor Philip Lowe downplayed rate hike speculations. In a speech to the Anika Foundation, Lowe argued that it will take time to drive faster wages growth and reiterated that he doesn’t expect a lift-off before 2024.

Lowe also highlighted the downside risks associated with the recent spike in new cases infected with the Delta variant of the coronavirus. Apart from this, the selloff of iron ore prices, along with worries about the Delta variant was seen as another factor that undermined demand for the commodity-linked aussie. The intraday decline seemed rather unaffected by the prevalent risk-on environment.

Even a subdued US dollar price action did little lend any support to the AUD/USD pair. The USD bulls now seem to have moved on the sidelines and prefer to wait for a fresh catalyst from Tuesday's release of the latest US consumer inflation figures. The data could provide clues about the likely timing of the Fed's tapering plan and provide a fresh directional impetus.

The US Producer Price Index (PPI) for August recorded the largest gain since November 2010 and indicated that higher inflation could persist for some time. A stronger US CPI report will reaffirm the expectations and pave the way for an imminent announcement by the Fed to begin rolling back its massive pandemic-era stimulus.

Nevertheless, the fundamental backdrop seems tilted firmly in favour of bearish traders and supports prospects for a further near-term depreciating move for the AUD/USD pair. Hence, any attempted recovery move might now be seen as a selling opportunity and runs the risk of fizzling out rather quickly ahead of the FOMC meeting on September 20-21.

Technical levels to watch

AUD/USD

Overview
Today last price 0.7334
Today Daily Change -0.0035
Today Daily Change % -0.47
Today daily open 0.7369
 
Trends
Daily SMA20 0.7309
Daily SMA50 0.7359
Daily SMA100 0.7525
Daily SMA200 0.7609
 
Levels
Previous Daily High 0.7377
Previous Daily Low 0.7336
Previous Weekly High 0.7469
Previous Weekly Low 0.7345
Previous Monthly High 0.7427
Previous Monthly Low 0.7106
Daily Fibonacci 38.2% 0.7361
Daily Fibonacci 61.8% 0.7351
Daily Pivot Point S1 0.7344
Daily Pivot Point S2 0.7319
Daily Pivot Point S3 0.7302
Daily Pivot Point R1 0.7385
Daily Pivot Point R2 0.7402
Daily Pivot Point R3 0.7427

 

 

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