Daily Market Recap - AUDUSD Drops to Decade Low 20

The Aussie Dollar fell below the 2019 lows on Thursday as markets reacted to the increased likelihood of a slowdown in the Australian economy. The AUDUSD is currently trading at 0.6613, a drop of 0.95 points over the previous day.

Despite the overall rise in the number of jobs added in January, the Australian unemployment rate increased to 5.3 percent from the previous 5.1 percent. Analysts attribute the weakening labor figures on the impact of the bush fires and the ongoing coronavirus outbreak.

Consequently, traders are beginning to price in a rate cut from the Reserve Bank of Australia in the near future. Australia is highly dependent on Chinese trade, a slowdown in China's manufacturing sector signals further woes to the Aussie Dollar.

On the other hand, the USD has been gaining steadily in recent weeks, with the dollar index nearing the 100 marks. The US manufacturing data released today show an increase in optimism. The Philadelphia Fed Manufacturing survey coming in above expectations at 36.7, a sharp deviation from the consensus of 12. The double whammy from local economic pressures and a rise in demand for the USD weighed heavily on the AUDUSD.

From a technical perspective, we haven't seen such low levels in the AUDUSD in over a decade. The last time the pair traded below the 0.667 marks was back in 2008. The bears have been in control since the start of the year, and look set to maintain their hold in the short term. The downside target is currently set at 0.6596. Should prices fail to show signs of recovery at that point, sellers will likely push the price to 0.6545. With the RSI in the undersold territory, a potential pullback is on the table, however, the upside scenario is likely capped at the psychological 0.65 level.

(Chart Source: Tradingview 20.02.2020)

Looking ahead, the economic data releases will focus mainly on the US PMI figures on Friday. Traders will look for confirmation in the increased US manufacturing activity for a further short play in the AUDUSD.

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.