The AUD/USD pair remained depressed for the second straight session on Friday and was last seen trading near the lower end of its daily trading range, around the 0.6535-30 region.
The pair extended this week’s retracement slide from multi-week tops – levels beyond the 0.6600 mark set on Wednesday – and was being weighed down by worsening US-China relations. Diplomatic tensions between the world’s two largest economies escalated further after Zhang Yesui, speaker for the National People’s Congress (NPC), said on Thursday that China will firmly defend its interests if the US does things that undermine China’s core interests.
Adding to this, China’s decision to impose new Hong Kong security law further fueled concerns about a major US-China tussle. The latest developments forced took its toll on the global risk sentiment and forced investors to take refuge in the safe-haven US Dollar, which, in turn, prompted some follow-through selling around the perceived riskier currency like audusd.
This coupled with the rating agency Fitch’s decision to cut Australia’s outlook to negative from stable exerted some additional downward pressure on the Australian dollar and contributed to the offered tone surrounding the AUD/USD pair.
Despite the pullback, the pair has still managed to hold above the 100-day SMA resistance breakpoint-turned-support near the key 0.6500 psychological mark. Hence, it will be prudent to wait for some strong follow-through selling before confirming that the AUD/USD pair might have already topped out in the near-term and positioning for any further near-term depreciating move.
Trade idea:- One can go for short at 0.6550 for the target of 0.6500 and 0.6400 with the stop loss of 0.6610.
