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The Australian dollar has done a decent job of holding above 0.7180 but there’s a lot of data scheduled for release next week and if the Chinese economy slows further or Australian GDP surprises to the downside, support could break. The rallies have been shallow with the divergence between Australian and U.S. monetary policy keeping AUD/USD under pressure. The market is still looking for another rate cut from the RBA this year and the Fed is expected to raise interest rates as early as the summer. However given how well AUD has held 72 cents, if Chinese data improves and growth in Australia accelerates, AUD/USD could find its way back to 73 cents.
Technically AUD/USD has held below its 200-day SMA for the past week – that’s the key level to watch. If the currency breaks above the SMA at 0.7252 it is likely headed to the 100-day SMA at 0.7340. If it breaks below the May low of 0.7145, its headed for 71 cents and possibly even 70 cents.