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AUD/USD: The outbreak of the coronavirus afflicts the Australian dollar; 2019 minimum targeted

AUD/USD: The outbreak of the coronavirus afflicts the Australian dollar; 2019 minimum targeted

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The Australian dollar does not stop suffering and widens its declines against the US dollar in the penultimate trading session of the week. In detail, the AUD / USD (Australian dollar / US dollar ) yields around 0.7 % and threatens to fall below the psychological level of 0.6700.

Since the beginning of 2020, the behavior of the ocean currency has been disappointing, but its declines have deepened in recent weeks due to the spread of the coronavirus in China.

The Australian market is one of great exposure to China, the second largest economy in the world. In fact, during the last decades, the red giant has become Australia’s main trading partner by receiving about a third of its annual exports. Therefore, any slowdown in economic activity in the Asian nation usually has a negative impact on the demand for Australian products and, therefore, on its currency (AUD).

If we look at the behavior of the AUD/USD since the first news about the coronavirus emerged, we can see how the pair has operated with a strong bearish bias. Due to the state of alert in China, various regions of the country are practically quarantined, which has affected economic activity, as well as the demand for exports from other countries.

As if that were not enough, the uncertainty in the markets caused by the current situation has diminished the appetite for riskier assets such as the Australian dollar, a factor that contributes additionally to its 2020 losses.

AUSTRALIAN DOLLAR TECHNICAL ANALYSIS

In terms of the technical analysis, the AUD / USD currently records its fifth consecutive week down. With the invalidation of the Fibonacci retracement of 76.4% (from the minimum of October to the maximum of December 2019), it would not be surprising if the pair deepens its declines and tests the support area of ​​0.6670 (S1) formed by the 2019 lows If this floor is penetrated with conviction, the AUD / USD would have the clear path to reach minimums not seen since 2009.

On the contrary, a sudden recovery of the Australian dollar could lead to the price to the region of 0.6756 (R1), where the 76.4% Fibonacci level mentioned above is aligned. If buyers manage to overcome this resistance, the next bullish target is around 0.6780 (R2), a region where it crosses a long-term downward trend line drawn from the maximum of January 2019.

DAILY GRAPH AUD/USD – (JANUARY 31, 2020)

AUDUSD - 01/31/31

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