- AUD/USD sees a sharp sell-off on renewed China growth concerns.
- US dollar gathers upside traction as risk-off remains at full steam.
- Multiple rejection at 200 DMA spells trouble for the aussie ahead of RBA/ Fed minutes.
AUD/USD is falling hard towards 0.7050, as the selling interest around the aussie dollar remains unabated amid resurfacing concerns over China’s economic recovery.
Disappointing Chinese acitivity numbers for July raised alarm that the post-pandemic economic recovery is weakness in the workd’s second-largest economy. This has rattled market sentiment while weighing heavily on the Chinese proxy, as well as, the higher-yielding AUD.
Additionally, tensions are building up between Washington and Beijing after a US delegation arrived in Taiwan, especially after the contentious visit by House Speaker Nancy Pelosi. The US-China geopolitical risks are also rendering AUD-negative. Commenting on a US congressional delegation’s visit to Taiwan, China Global Television Network (CGTN) expert Han Peng said, Beijing may tighten its military blockade of Taiwan and economic sanctions on the island.
The US dollar emerges the sole winner amid the risk-off scenarion, extending Friday’s rebound towards 106.00 against its major peers. Attention turns towards Tuesday’s RBA minutes and FOMC minutes due to be published on Wednesday for fresh trading opportunities in the pair.
From a short-term technical perspective, the daily structure appears interesting, as the price has run into the critical horizontal 200-Daily Moving Average (DMA) at 0.7121 for the third trading day in a row.
This has spelled trouble for AUD bulls, prompting a pullback towards the 0.7050 psychological support. The next key downside target aligns at 0.7000, the round figure.
Although bulls still remain hopeful as the 21 DMA has crossed the 100 DMA for the upside, flashing a bulish signal.
The 14-day Relative Strength Index (RSI) has turned south but remains well above the midline, suggesting that the sell-off could be seen as a good buying opportunity.
If bulls manage to defend 0.7050, then a rebound towards 0.7100 will be in the offing, The 200 DMA barrier will be back on buyers’ radars on a renewed upside.
AUD/USD: Daily chart
