AUD/USD daily chart
The pair is down 0.4% today and erases the advance from yesterday, moving back to test the August low of 0.6347. We have been here before with last week's low touching 0.6336 but in the end, the daily and weekly close held. Will it be the same this time? The pressure is definitely building.
With China continuing to allow the yuan to weaken, it is difficult for the Aussie to stay away for now. USD/CNY is up again today to 7.28, rising back to its highest levels in two weeks. That's part of the equation weighing on AUD/USD as a whole recently.
Furthermore, the Aussie side of the equation is not helping as the RBA is starting to move towards a more hawkish stance. The door is open for a rate cut in February and market prices are showing that a 25 bps move is likely at ~65% now.
But for this week's trade, it's all about the dollar side of the equation. The main event to watch this week is the Fed and that will ultimately settle the score if we are to get a steeper breakdown in AUD/USD.
The technicians are certainly responding to it. It is now a matter of traders looking to the Fed for confirmation tomorrow.
