AUD/USD Faces Strong Multi-Year Resistance Zone After Recent Declines

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The AUD/USD currency pair has continued to fall since the start of last year to the current level of about 0.6874. This has pushed it to new multi-year lows last witnessed in 2016.

Although the pair did momentarily fall to trade below the current level when it hit 0.6748 at the start of this year, that decline was only short-term. It was back up in a flash.

The current scenario is different. The fall has been steady and gradual, which means it will be difficult to fashion another fast rebound. As such, it makes sense to argue that the AUD/USD currency pair is currently trading at levels last witnessed years ago.

AUD/USD Fundamentals Overview

From a fundamental perspective, the AUD/USD currency pair’s recent movement has been driven by two things. The first is the strength of the US economy, which boost the greenback. The second is the fall in optimism for the Reserve Bank of Australia ‘RBA’ hiking the cash rate.

The RBA has been very cautious in its approach on interest rates with the economy’s performance largely pegged on the level of exports to China.

And with China currently held up in what has been deemed to be a trade war with the US, investors are lowering their optimism on the outlook of China’s economy. This affects Australia’s economy and the Aussie (AUD) along with it.

AUD/USD Technical Analysis (the Daily Chart)

AUD/USD Faces Strong Multi-Year Resistance Zone After Recent Declines

Technically, the AUD/USD currency pair appears to be trading within a descending channel, which dates back to the start of 2018. This trend started after what appears to be a double-top reversal pattern following an extended bull-run.

Given the current position of the pair and the trend, the bulls will target profits at around 0.7017 while the bears will look to strike profits by targeting the lowest point on the daily chart at 0.6748.

AUD/USD Technical Analysis (the Weekly Chart)

AUD/USD Faces Strong Multi-Year Resistance Zone After Recent Declines

The weekly chart is the best example to demonstrate the resistance the pair is facing based on its current position. The AUD/USD is currently trading too close to what appears to be a multi-year resistance zone.

This level of 0.6872 has only be breached a handful of times since the year 2003. Dropping a few pips down towards 0.6700 forms the ultimate resistance, breached only during the global financial crises of 2008-2009.

In summary, given both the technical and fundamental circumstances discussed here, it is correct to say the AUD/USD currency pair is facing a test of time. It is under huge pressure to rebound, but the momentum is with the bears.

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