December 4, 2022

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AUD/USD falls to fresh lows in nearly a month, downside risks increasing

2 min read

AUD/USD falls by over 0.6% to 0.7290, its lowest level since 21 July

AUD/USD D1 17-08
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The drag in the kiwi today isn’t the only thing in the spotlight in FX today, as the aussie is also dragged to fresh lows in nearly a month.

The fall has some indirect influence to the kiwi’s plunge but it also comes as the RBA minutes highlight a risk that policymakers may delay the taper timeline, depending on how the virus situation in Australia pans out.

And for now, the situation in NSW is not too comforting as rather muddies the outlook.

Looking at the charts, AUD/USD is traversing levels below 0.7300 again and it brings into question key support from the 21 July low @ 0.7289.

A daily break below that sets the stage for a sharper drop in the pair towards 0.7200 with sellers potentially even eyeing a push towards 0.7000 if risk momentum also sides with the technical thrust that may take place.

And it’s not just AUD/USD in which downside risks are building for the aussie. A look at AUD/JPY also shows a potentially larger drop unfolding:

AUD/JPY D1 17-08

While not quite a divergence trade in terms of monetary policy, this is starting to develop into a good divergence trade in terms of risk sentiment in the market and what the market is focusing on right now i.e. delta variant concerns.

Not to say that Japan’s virus situation is any better, but the yen is more focused on and more influenced by risk appetite/haven flows so that makes it a good counter to the aussie – which appears to be struggling on almost all fronts at the moment.

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