AUD/USD: long-term 61.8% Fib support come could into play if trade wars escalate

The US is all set to fire the first shot in the trade war with the US, Beijing has vowed to retaliate in kind.
Aussie risks falling below 0.7327 - 61.8 percent Fibonacci retracement of the rally from the January 2016 low to the January 2018 high - on escalating trade tensions.

Omkar Godbole FXStreet Contributor

The US-China trade war is close to becoming a reality and hence the probability of Aussie dollar losing the long-term support of 0.7327 (61.8 percent Fibonacci retracement) is high.

At press time, the AUD/USD is trading at 0.7383, having clocked a high of 0.7397 earlier today. The currency pair has been restricted to a narrow range of 0.73 to 0.77425 since June 27.

The US would begin collecting tariffs on $34 billion in Chinese goods at 12:01 a.m. Washington time (0401 GMT) on Friday, according to Reuters. Further, Trump has threatened to impose additional tariffs on goods worth $400 billion if China retaliates in kind to initial US tariffs.

Clearly, the world's two largest economies are heading for a long drawn out trade war and that could hurt AUD and other risk assets.

A break below 0.7327 would bolster the already bearish technical setup - bear flag breakdown on the daily chart and downward sloping 50-day, 100-day and 200-day moving averages.

AUD/USD Technical Levels

Resistance: 0.74 (psychological hurdle), 0.7424 (July 4 high), 0.7444 (June 24 high).

Support: 0.7361 (previous day's low), 0.7327 (61.8 percent Fibonacci retracement), 0.73 (psychological figure).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	High
1H	Bearish	Neutral	Low
4H	Bullish	Neutral	Low
1D	Strongly Bearish	Neutral	Shrinking
1W	Bearish	Neutral	Shrinking
Updated Jul 6, 02:30 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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