AUD/USD Eyeing New Monthly Low Despite US-China Trade War

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The AUD/USD currency pair seems to be holding steady at the current range of about 0.7050 to 0.7080. Some traders are looking at the 0.7100 as a potential short-term target, while others are optimistic that a slide further down could take AUD/USD towards the 0.7000 level, which would be a new monthly low. The pair last traded at this level only momentarily at the start of the year.

AUD/USD Currency Pair Fundamental Analyses

The Reserve Bank of Australia (RBA) has held rates steady since 2016. This has had a positive impact on the AUD/USD with investors impressed with the RBA’s cautious approach to the interest rate hike. Currently, investors expect the RBA to hike rate next year at the very earliest.

The US-China trade war continues to weigh on the Australian dollar. The Aussie is highly dependent on the performance of the Chinese economy because of the level of from Australia to China. And with the trade war between China and the US still very much intense, the Chinese economy has already started to experience a slowdown due to this.

Australia’s housing market has also suffered greatly due to the US protectionist economic stance. And despite the RBA base interest rate remaining at 1.5% since 2016, mortgage rates have continued to climb.

AUD/USD Technical Analyses (4-Hourly Chart)

AUDUSD Chart H4 February 12, 2019

From a technical perspective, the AUD/USD currency pair appears to be trading within a slightly bullish-looking channel in the 4-hourly chart above. The pair recently bounced off the lower upward trending support line and looks set for an intersection with the median line of the Andrews Pitchfork.

Crossing the median line could further see the pair climb to the +25% level of the pitchfork, which currently coincides with R1 at around 0.7200 level. More opportunities can be found closer to the +50% level of the pitchfork, which again is just above R2 (0.7276). These opportunities will be very exciting for the bulls.

As for the bears, opportunities are also in plenty down below and given the current momentum, it looks like they will be more optimistic than the bulls. The bears will be looking to target profits at S1 in the short term at around the 0.7022 level, which is just below the -25% level of the pitchfork.

For longer time frames, S2, which is positioned just below the -50% level of the pitchfork at around 0.6937 will be an interesting prospect. Should the AUD/USD pair continue to experience downward pressure.

AUD/USD Technical Analysis (The Daily Chart)

AUDUSD Daily Chart February 12, 2019

Looking at the daily chart, the overall picture appears to change significantly. While in the 4-hourly chart the pair appeared to be trading within a slightly bullish channel, now it looks a lot more like a bearish channel, which dates back to the start of last year.

However, the pair appears to have slightly shifted from the previous chart, which was trending slightly lower to a new one that is a little bit higher. That shift came during a short-term rally that occurred between October and December last year. The AUD/USD currency pair appears to have succumbed to more pressure over the last 8 weeks thereby forming another bearish channel just above the old one. And now, there is a major support zone positioned the 0.7050 and 0.7080 range, which could be breached in a few weeks’ time.

Should the pair defy the odds and rally back up, then the bulls will be targeting opportunities at R1, at around the 0.7350 level and R2 at around 0.7450 level for profits of 350-450 pips.

In summary, the AUD/USD currency pair is currently at an inflection point. The bears can argue that the strength of the USD will continue to push the pair downwards while the bulls will be hoping that the Aussie can recover and overcome downward pressure to rally back towards YTD highs.

The trade war between the US and China will be watched closely because the Chinese economy weighs heavily on the Aussie. On the other hand, the RBA seems set to hold interest rates steady through 2019, with investors expecting a hike in 2020 at the very earliest. This gives the greenback an edge over the Aussie.

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