Daily Market Recap -AUDUSD

The Aussie dollar fell across the board on Tuesday as fears resurfaced over the health of the Australian economy. Speculation of a rate cut by the Reserve Bank of Australia (RBA) has prompted a significant selloff in the currency. The AUDUSD pair is currently down 1.09 percent over the previous day at the time of writing.

The escalating tensions in the Middle East and the on-going wildfire crisis in Australia have weighed heavily on the Aussie dollar. The trading sentiment is skewed to the downside following the pair's strong gains in the month of December. The ANZ Job Advertisement index for Australia came in at -6.7 percent, a markedly decrease over the previous month at -1.8 percent. The index is seen as a leading indicator for Australian employment figures, which in turn provides a signal as to the state of the current economic landscape. Faced with these new developments, markets are now pricing in a February rate cut by the RBA at a 57 percent probability.

From a technical perspective, the AUDUSD pair has broken through the initial support level at 0.6895 openings the door for a test of the current support at 0.6857. The 50 percent Fibonacci retracement failed to contain the drop, seeing the pair shed almost 61.8 percent of gains since November lows. The RSI remains above the 30 marks, hinting that a further decrease in price may still be in play. Should the pair fail to hold at the current support, the next key area should be at the long-term moving average in yellow, slightly above 0.6816. On the upside, given the significant drop experienced today, we could be looking at a short-term reversal fuelled by short covering to bring the pair back above the parallel pitchfork channel in blue.

(Chart Source: Tradingview 07.01.2020)

(Chart Source: Fxstreet 07.01.2020)

Looking ahead this week, there will be trade balance figures released on Thursday and retail sales on Friday which will impact the AUDUSD. With the macro and technical indicators looking rather fragile, the expectations of the pair remain bearish in the short term.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.