- Commodity currencies plunge across the Forex dashboard amid central banks’ tightening.
- Australia’s monthly retail sales emerged better than anticipated.
- Only a move past 0.68 would annul the bearish sentiment.
Commodity currencies like the Australian dollar outperformed amidst the COVID-pandemic.
Commodity prices soared as banks eased the financial policy through bond-buying programs and low rates. That bolstered currencies such as AUD. However, those days are long gone.
Central banks are reversing at the moment, selling previously bought bonds and raising rates. Furthermore, the sentiment remained highly extreme since, in some scenarios, there’s a low bound on rate & the uptrend stays unbounded.
Thus, it makes sense that the AUD is among the weakest leading currencies on the Forex dashboard. Indeed, RBA’s (Reserve Bank of Australia) rate hikes didn’t help.
Meantime, the local economy stays strong. For instance, the last economic stats show this week saw Australian monthly retail sales surpass expectations. So, should you pick the AUD from the current lows?
Monthly Retail Sales Strengthen
The latest Australian economic data shows monthly retail sales stay strong – Sales at household goods, dining out, or department stores are massive for the currency to weaken.
Moreover, the three-month yearly sales growth pace is above 8%. Thus, the Reserve Bank of Australia should keep tightening, backing the currency.
AUD-USD Chart Appear Increasingly Bearish
Though retail sales stay stronger than anticipated, the AUD-USD chart seems heavy. Moreover, it might be that only the United States dollar goes higher against its peers. Though many might trust this represents a reversal setup (a falling wedge), the formation has one massive issue.
The pattern’s last segment should have pierced the lower trend line. Instead, the market declined further, indicating that the setup is a running triangle. Now, what for AUD-USD bulls?
Market players should adopt the wait-and-watch narrative when watching the running triangle’s cancelation zone at 0.68. A rebound to 0.68 annuls the continuation setup, and the bottom could be in place.
What are your opinions about the Australian currency and prevailing economic conditions? You can use the comment section below for your reply.