AUD/USD Forex Signal: Consolidation Signals Further Weakness


The pair is likely to break down later today as the bears target key support at 0.7125.

Bearish view

  • Sell ​​AUD/USD and set take-profit at 0.7125.
  • Add a stop-loss at 0.7300.
  • Lead time: 1-2 days.

Bullish view

  • Set a buy-stop at 0.7240 and a take-profit at 0.7325.
  • Add a stop-loss at 0.7150.

AUD/USD fell on Monday and Tuesday morning as concerns over the Omicron variant pushed the US dollar higher. The pair is trading at 0.7210, around 1.45% below last week’s high.

Covid risks in Australia

The Australian economy is seeing escalating risks as cases of Omicron have increased in recent days. In response, states across the country announced several measures to encourage people to get vaccinated. They also blocked the entry of unvaccinated people abroad.

This explains why Djokovic’s crisis has made headlines around the world. The tennis star was deported after his failed appeal to stay in the country.

Meanwhile, the AUD/USD pair declined even after the latest economic data from China. According to the National Bureau of Statistics (NBS), China’s economy performed strongly in 2021. The economy grew 8.1% in 2021 and 4.0% in the fourth quarter alone.

Additional data showed that the economy was doing well. For example, retail sales rose 1.7% in December while the unemployment rate edged up to 5.1%.

Still, the challenge for China’s economy is that the number of Covid-19 cases is rising in some cities. And officials in cities with more than 20 million people have announced closures. On Monday, Beijing also announced that tickets would not be sold during the event in a bid to slow the spread.

The country also announced stimulus measures in a bid to boost the economy. The government has said fiscal stimulus will be needed in the year Xi Jinping seeks his third term in office. Chinese developments are important for the Australian dollar as China is the biggest buyer of Australian goods.

AUD/USD Forecast

The four-hour chart shows that the AUD/USD pair has been trending down for the past few days. The pair formed a small bearish consolidation pattern. It also moved slightly below the 25-day moving average.

The pair has formed an ascending channel which is shown in black. It is slightly above the lower side of this channel. Also, lies along the 38.2% retracement level.

Therefore, the pair is likely to break down later today as the bears target key support at 0.7125. This view will be invalidated if the price breaks above 0.7250.



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