AUD/USD Price Analysis: Teasing a rising wedge breakdown amid US-China woes
- AUD/USD remains sold-off into dovish RBA tone and US-China woes over Taiwan.
- RBA hikes key rates by 50 bps but says it's not on a pre-set tightening path.
- A potential rising channel breakdown on the 1D targets 21 DMA at 0.6873.
AUD/USD is holding the lower ground above 0.6900, losing nearly 1.50% on the day, as the AUD bulls continue to face a double-whammy this Tuesday.
Risk-aversion remains at full steam, as markets stay anxious ahead of the expected visit of US House of Representatives Speak Nancy Pelosi to Taiwan around 1430 GMT. The US remains unintimidated by the Chinese threats but Beijing and Taipei have stepped up their military responses in a show of strength, as Pelosi visits the self-ruled island claimed by the dragon nation.
Another reason for the aussie sell-off is the dovish signal from the Reserve Bank of Australia (RBA) during its monetary policy meeting. The RBA raised the key rate by 50 bps to 1.85% this month, as widely expected. However, the central bank noted that they are not on a pre-set tightening path, in a way abandoning the forward guidance, which triggered a fresh downfall in the aussie dollar.
All eyes now remain on Pelosi’s arrival to Taipei, which could see a fresh risk-aversion wave spelling out in the early American session. Meanwhile, the pair also remains exposed to downside risks, given that it is on track to confirm a rising wedge breakdown on the daily chart.
AUD/USD has breached the horizontal 50-Daily Moving Average (DMA) support at 0.6966, which has opened up the additional downside.
A daily closing below the rising trendline support at 0.6952 will validate the bearish channel.
The next relevant downside cap is pegged at 0.6873, which is the horizontal 21 DMA.
The 14-day Relative Strength Index (RSI) is attacking the midline, suggesting that there is more room southwards.
AUD/USD: Daily chart
Recapturing the 50 DMA is critical to initiating any meaningful recovery towards 0.7000.
The intraday high of 0.7034 will emerge as a tough nut to crack for AUD bulls.
AUD/USD: Additional levels to consider
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
