AUD/USD Under Intense Selling Pressure, Prints Lowest Since 2009

AUD/USD Under Intense Selling Pressure, Prints Lowest Since 2009

  • Today’s low of $0.6565 is a fresh 11-year low for the Aussie
  • Coronavirus outbreak to Europe has investors more worried than before
  • “Investors are getting increasingly nervous,” analysts from the ANZ say

AUD/USD has made another leg lower this week to push below $0.66 for the first time since March 2009 on the worsening global sentiment.

Fundamental analysis: Coronavirus continues to weigh on commodity currencies

In the previous days, commodity-linked currencies have continued to move lower as coronavirus fears grow. The virus outbreak to Italy and Eastern Europe hasn’t come unnoticed as investors flee to safe havens.

As always, any risk-off mode is closely associated with the intense selling of commodity currencies. As a result, AUD/USD is now hitting the lowest levels seen since March 2009 on a worsening global sentiment and increasing demand for the greenback.

“COVID-19 [coronavirus] developments continue to dominate headlines, and with more and more estimated impacts on global growth hitting the wires investors are getting increasingly nervous. This devastating situation is evolving rapidly, with cases outside of China firmly in the spotlight,” said analysts at the Australia and New Zealand Banking Group (ANZ).

The Australian dollar and economy are expected to take a stronger hit than other currencies and countries given its close connection and reliance on Chinese economy and manufacturing.

The domestic data is also not helping the Aussie as Australia’s fourth quarter (Q4) Construction Work Done plunged 3%, compared to analysts’ estimates of negative 1% expectations.

Technical analysis: Fresh multi-year lows

Today’s low of $0.6565 is a new 11-year low for the Aussie. The fact that there is almost no rebound is what should worry the bulls as the selling pressure has intensified significantly over the past few weeks.

As seen in the weekly chart below, the price action is almost in a free fall as the bears eye a trip below $0.65 next. A test of $0.6470 is almost a certainty if the global sentiment is further worsened.

AUD/USD weekly chart (TradingView)

“For now, there is no change in our view wherein the risk for AUD is on the downside. That said, AUD has declined considerably since the start of the year and we have a relatively modest downside ‘target’ of 0.6550. On the upside, a breach of 0.6680 (no change in ‘strong resistance’ level) would indicate the current downward pressure has eased,” FX Strategists at UOB Group said.

In case there is a sharper move to the downside, the key mid-term target for the bears are levels from the early 2009s when the price action traded in the low $0.63s.

Summary

AUD/USD has been hit hard by further coronavirus outbreak. The pair hit a fresh 11-year low today on the worsening global sentiment as investors shift their funds towards low-risk assets.

By Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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