AUD/USD: Bears Threatening 0.90 Soft Support

The downtrend in the AUD is continuing strong, with prices currently trading below yesterday’s low despite a bullish recovery back towards 0.91 during European/early US hours. The rally yesterday can be attributed to USD weakness due to the alleviating of QE taper fears yesterday.

US Stock prices and EUR/USD rallies are providing good support for that assertion. However, unlike the EUR/USD that managed to hold onto most of its gains yesterday, AUD/USD collapsed totally, highlighting the strong bearish sentiment that is currently surrounding AUD/USD.

This bearish sentiment ignored the two piece of minor good news this morning. Australia’s DEWR Skilled Vacancies grew 0.7% in the month of July, while June’s figures have been revised higher as well. The Westpac Leading Index showed stability in the economy as well, reversing last month’s shrinkage of 0.1%. However, the AUD/USD did not enjoy any semblance of bullish reversal, with prices accelerating lower when the numbers were released.

Hourly Chart

Price did recover slightly following the sell-off which broke soft support of 0.904. However, the recovery only served to affirm current bear pressure, with bulls unable to clear the 0.904 level, resulting in renewed offers driving prices down to fresh weekly lows.

This is significant as Stochastic readings were on the verge of showing a bull cycle, which would have been confirmed with price breaking 0.904, thus opening a move back towards 0.91 once again. However, due to the rejection at 0.904, Stoch readings are currently pointing lower again, forming an interim peak just above the 20.0 mark. This suggests that the bearish leg may still have some distance to run, favoring a temporary bearish move from here.

Daily Chart

This notion is echoed by the Daily Chart, which suggests that a move back towards 2013 lows of 0.89~ and perhaps beyond is possible, based on the rejection of 0.92 as well as the Stochastic indicator. Interestingly, the Daily Chart shows potential interim support around 0.90 in the form of 13th July lows.

Considering that the short-term chart is highly oversold, it is conceivable that a slight rebound may occur around the round figure support. However, it is unlikely that this would be able to grow into a stronger bullish reversal with long term Aussie fundamentals continuing to look bleak.

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