The Australian Dollar Is “Captured” By “Bears”

The Australian Dollar keeps testing its short-term “bottom”. This morning, AUSDUSD was trading in the downside area it last reached in January 2017. It seems like another new low are just around the corner because the Aussie became very sensitive to all negative things that are happening on the global market, such as “trade wars” pressure the USD is trying to bring on China.

This week, there may be additional information on trade and economic relations between the USA and China. Most likely, the USA will announce the extension of import duties on Chinese goods before September 6th. The volume expected to be about 50 billion USD, but different sources provide different numbers. Some even say it will be 200 billion USD. The only thing that is known for sure is that the above-mentioned duties on several goods will increase up to 25%. This is intended to make Chinese goods less profitable and the domestic demand is expected to switch to local offers.

The statistics published in the morning by China showed that the Manufacturing PMI from Caixin dropped up to 50.6 points in August after being 50.8 points in the previous month. The indicator is slowing down, which is a direct result of trade issues between the USA and China.

Domestic statistics from Australia, in its turn, weren’t too great as well and showed a decline in the Retail Sales. The indicator didn’t change in July, although it was expected to add 0.3% m/m after expanding by 0.4% m/m in June. The components of the report show that consumers cut their expenses on clothing, footwear, and household goods, as well as department stores retailing. This decline was somehow eliminated by increased demand for cafes, restaurants and takeaways, and food.

Obviously, a slowdown in the Retail Sales is a negative signal for the Aussie.

The H1 chart of AUDUSD shows a descending impulse inside the long-term downtrend. The main downside target is the support line of the major channel at 0.7125. Also, one should pay attention to the short-term trend channel, because the current pullback may reach its resistance line and break the key level at 0.7225. If it happens, the price may reverse the long-term trend. The main target of short-term uptrend will be the resistance line of the long-term channel at 0.7325.

This article was written by Dmitriy Gurkovskiy, a Chief Analyst at RoboForex