The Australian dollar came under heavy pressure yesterday on the back of growing concerns about China’s economic slowdown.
“We saw the Caixin Chinese manufacturing PMI data which unexpectedly dipped into contraction territory,” said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
“And that pushed the Aussie dollar down by half a cent over the past 24 hours,” he added.
According to McKenna, aside from the fundamental factors weighing on the Aussie dollar, the charts also suggesting further weakness.
“The monthly charts are pointing to a possible move towards the .70 cents level or just below that,” McKenna said.
He said it is worth noting that the Aussie dollar made a recent low at 0.7330 and that is where prices appear to be biased in the short term.
“It was solid support a couple of weeks back with traders clearly respecting this level. So it should find the buyers again,” he said.
He added that for the longer term, the month charts suggest a currency stuck in a broad range but with a bias back down toward the bottom of that range.
From his point of view, McKenna said in the grand scheme of things, and on this very long time frame over more than 20 years the Aussie is trading narrowly and sideways.
So having spent a protracted period of time testing the top of the range, and having found solid resistance at these range tops the Aussie has drifted lower for the past four months, he noted.
At the moment, McKenna said the key level for the Aussie is 0.7330.
“If the May low breaks then a run under 72 cents to the 2017 low at 0.7150i/60 is in the offing,” he said.
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