The AUD/USD currency pair has been in focus among traders and investors due to its recent performance. The pair has failed to remain above the key support level of 0.6660, according to the economists at OCBC Bank. This could indicate further downside for the currency pair. In this article, we will discuss the possible reasons for this and what it means for traders and investors.
Reasons for the AUD/USD’s Failure to Hold Support:
One of the primary reasons for the AUD/USD’s failure to hold the support level is the strengthening of the US dollar. The US dollar has been rallying against major currencies, including the Australian dollar, due to the positive economic data and the Federal Reserve’s hawkish stance. As a result, the demand for the US dollar has increased, which has put pressure on the AUD/USD pair.
Another reason for the AUD/USD’s weakness is the ongoing trade tensions between the US and China. Australia is heavily dependent on China for its exports, and any negative development in the US-China trade relationship can impact the Australian economy and, subsequently, the AUD. Moreover, the ongoing geopolitical tensions, including the US-China trade war and Brexit, have contributed to the volatility in the currency markets.
Implications for Traders and Investors:
The failure to hold the key support level of 0.6660 indicates that the AUD/USD pair may be headed for further downside. Traders and investors who are bullish on the pair may want to reconsider their positions and adopt a more cautious approach. On the other hand, those who are bearish on the pair may find new opportunities to profit from the downtrend.
Traders can use technical analysis tools, such as trend lines and moving averages, to identify key levels of support and resistance. They can also use indicators, such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), to gauge the momentum of the pair and identify potential reversal points.
Investors who have exposure to the AUD/USD pair may want to consider hedging their positions to reduce the risk of losses. They can use financial instruments, such as options and futures, to hedge their positions against adverse market movements. Additionally, investors can diversify their portfolios by investing in other currencies or assets, such as stocks, bonds, or commodities.
In conclusion, the AUD/USD pair has failed to hold the key support level of 0.6660, indicating that the pair may be headed for further downside. The strengthening of the US dollar and the ongoing trade tensions between the US and China are among the primary reasons for the AUD/USD’s weakness. Traders and investors who are bullish on the pair may want to reconsider their positions, while those who are bearish may find new opportunities to profit from the downtrend. Traders and investors can use technical analysis tools and financial instruments to manage their risk and diversify their portfolios.