Sellers show that they are in near-term control as the week begins
With price having failed to break above the 100-hour MA (red line) yesterday, sellers have taken advantage of that and continues to drive price lower in overnight trading as risk sentiment in markets continue to sour. The gains from Chinese equities from Friday appear to be short-lived as jitters start to return and some risk off flows is helping to move the aussie to near the year's lows against the dollar today.
The low in this session hit 0.7059 with the year's low sitting at 0.7041. That will be a key support level ahead of a test towards the 0.7000 psychological handle with the 10 November 2015 low @ 0.7017 also providing a little bit more support.
Right now, sentiment continues to be the key driver in markets this week and that is not giving the aussie any room to breathe despite stretched short positioning:
Fundamentals continue to dictate a move lower for the pair as monetary policy, yields, and economic growth divergence continues to grow, and with risk sentiment also supporting the case - not to forget year-end dollar funding demand - a break of the 0.7000 handle may see a swift move lower some more as stops are taken out.
But given positioning data, I still foresee some form of retracement to come and it'll be a quick and nasty one when it does happen. Reckon it could be something like a break below the 0.7000 handle before a swift recovery back above it before price stabilises once again.
The move lower in AUD/USD to start the week continues to solidify the pattern of lower highs, lower lows in the pair and reaffirms shorting it as the gift that just keeps on giving so far this year.
