The Australian Dollar plunged to its lowest levels in more than 11 years on Friday as worries about the economy and a surge in the U.S. Dollar encouraged heavy liquidation. A deterioration in risk sentiment as well as a plunge in gold prices were responsible for some of the weakness.
However, most of the selling pressure was fueled by President Trump’s declaration of a U.S. national emergency over the quickly spreading coronavirus, and an aggressive move by the Federal Reserve to step up its stimulus measures to counter signs of market dysfunction in the face of the spreading coronavirus.
On Friday, the AUD/USD settled at .6179, down 0.0058 or -0.94%.
Trump’s declaration will free up as much as $50 billion in financial resources to efforts by states and U.S. territories to assist Americans affected by the outbreak. The Fed’s move, which drove up Treasury yields, making the U.S. Dollar a more attractive asset, was designed to provide liquidity in an effort to prevent a financial crisis similar to the one in 2008 – 2009.
Daily Technical Analysis
The main trend is down according to the daily swing chart. A trade through .6123 will signal a resumption of the downtrend with the next targets the November 20, 2008 main bottom at .6074 and the October 27, 2008 main bottom at .6008.
The main trend will change to up on a move through .6685. This is highly unlikely, but due to the steep sell-off, there is always the possibility of a closing price reversal bottom.
The downside momentum on Friday created by Trump’s emergency declaration and the Fed’s move to shore up the financial markets with massive liquidity should be enough to trigger a resumption of the downtrend on Monday. This makes .6074 to .6008 reasonable downside targets. Whether buyers step in on a test of these levels is anyone’s guess since momentum seems to be overriding prices at this time.
On the upside, the first minor resistance angle drops in at .6214. The main resistance angle drops in at .6285. This angle, moving down at a rate of .008 per day, has been guiding the AUD/USD lower since the .6685 main top on March 9.
This article was originally posted on FX Empire
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