Bearish momentum has picked up once again in the Aussie dollar, following the Business Confidence release which came in worse than expected at 0 against a previous of 3. This has resulted in, not only sending the AUD/USD lower, but has also been the trigger for opening up the next phase of price action with the pair breaking out of the congestion phase of the last few weeks.
From a technical standpoint, February’s attempt to rally from the lows of the 0.7600 area was accompanied with falling volume, before the resistance in the 0.7900 region also brought a halt to this move. Having exhausted the move higher, bearish sentiment then returned with the pair breaking through potential support in the 0.7870 area, and finally on Friday moving through the 0.7720 platform (as denoted with the blue dotted line on the daily chart). The key level for the longer term is now building in the 0.7600 region, and once we see a close below this level, then downside momentum is likely to build further, with the sustained congestion phase above weighing heavily on the pair.
The fundamental picture too remains weak, with the Business Confidence release merely reinforcing this view. And with the RBA committed to a weaker currency, and lower interest rates, it seems likely the prospect of such a move may be coming sooner rather than later. The US dollar too is playing its part, with the dollar index now rising strongly, the longer term outlook for the AUD/USD remains very bearish.
By Anna Coulling