Trade ideas for July 19-23
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AUD: bearish prospect
2020-05-25 • Updated
The Australian dollar set a strong upward trend over a month. Will AUD loose its gains soon?
The Australian dollar gained last week on the news about the potential effective vaccine and the prospect of an upcoming recovery as economies were reopening. However, there won’t be any important economic reports from Australia this week. That’s why, all the movements of the Australian dollar will depend mostly on risk sentiment.
US-China tensions can escalate into Australia-China
The number-one trending topic these days is the US-China relationship. There had been already tensions between two world-largest economies, but they were worsened even more by China’s plans to impose a security law in Hong Kong. Most Western countries are against this law as it violates human rights.
Moreover, Australian Prime Minister claimed his support for Hong Kong’s autonomy that deteriorated the Australian relationship with China, as well. AUD was already under pressure by US-China tensions, but now it can have a direct conflict with China. It may turn out really badly for the aussie as China has been its main trading partner. Also, China has already banned imports of meat from Australia and imposed some extra tariffs. AUD will be under huge threat, if China continues its sanctions.
All eyes on the US-China phase-1 trade deal now. As any fresh impulse can have a huge negative impact on the Australian dollar.
Technical outlook
The AUD/USD had been rising since March 20. Nevertheless, it started contracting on May 21. It looks like a regular correction, but buyers are worried as the fundamental outlook is quite bearish. If it manages to break through the support level at 0.649, it will go even deeper to 0.64. Retracement levels are at 0.660 and 0.666.
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