Good day forex traders and koalas.
How was your trading week? Still cannot believe that the AUD/USD fell below parity? Well nothing in forex is impossible!
In the previous AUD/USD forecast we noted that the currency pair has fallen back into a technical bearish channel. Fundamentally due to China’s slow down, the Australian economy was facing rough waters. Commodities prices were weaker too.
Looking at the AUD/USD chart above, we noted continued bearish strength.
SMA 20 = Bearish
SMA 50 = Bearish
After falling back to the bearish channel, the currency pair continued to respect the upper and lower trend lines. If this continues, we would be looking at a possible 0.96. A little caution though about the the week’s low being not much lower than the last.
I mentioned many times that China’s economic performance affects the Australian economy and we are seeing a slow down in China. The China Purchasing Managers’ Index dropped to 50.4 from 53.3 and this is the weakest production growth since December. This slowing production growth drives worries that the global economic revival will derail. Add in the European budget deficit crisis, sentiments are bad.
In view of the weakening economic outlook, investors are also having speculations of a Reserve Bank of Australia cut of interest rates. A reduction at the upcoming June 5 meeting of the RBA will probably bring about further weakening of the Australian dollar.
The S&P / AXS 200 continues to hover near the 4000 level bringing the danger of a dip below 4000.
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