- AUD/USD is flashing red on escalating Sino-US trade tensions and flight to safety.
- The currency pair is teasing a bear flag breakdown – a bearish continuation pattern.
The AUD/USD pair is reporting losses for the third straight day, possibly due to the Sino-US political friction and a weaker daily Yuan fix by the People's Bank of China (PBOC).
The US House of Representatives on Tuesday approved a bill related to human rights in Hong Kong, moving the Hong Kong Human Rights and Democracy Act of 2019 a step closer to becoming law.
Beijing has responded by urging Washington to refrain from interfering in its internal matters and has also warned retaliation against the US policy.
Risk assets, therefore, have come under pressure and the safe havens like the Japanese Yen and Gold are flashing green.
Further, the PBOC cut yuan's fixing by 38 pips to 7.0746 per USD, possibly adding to the bearish pressures around the AUD.
As of writing, the AUD/USD pair is trading at 0.6738, representing 0.20% losses on the day. Notably, the pair is flirting with the lower edge of the bear flag on the daily chart.
A close below 0.6737 would confirm a bear flag breakdown and create room for a drop to levels below 0.6520 (target as per the measured move method). On the way lower, the pair may find support at 0.6671 (Oct. 2 low).
The outlook would turn bullish if the pair rises above Friday's high of 0.6810.
Daily chart
Trend: Bearish
Technical levels
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