FXOpen
Key Takeaways:
- AUDUSD hits multi-year low level amid devaluation of Chinese Yuan
- Bears look in complete control
- A bullish pin bar or engulfing candle will signal a bullish reversal
The Aussie dollar (AUD) plunged to the lowest level since 2008 against the US Dollar (USD) on Wednesday, dragging the AUDUSD pair to less than even 0.7250 after China’s central bank devaluated the Yuan.
The technical bias remains extremely bearish due to a lower low and lowers high in the ongoing wave.
The bearish potential has increased exponentially. Short term, the 1-hour chart shows that the 20 SMA has accelerated its decline and stands now around 0.7320, while the RSI indicator holds near oversold levels and the Momentum indicator hovers below its 100 level after correcting oversold readings.
In the 4 hours chart, the technical indicators head sharply lower, despite being near oversold levels, whilst the 20 SMA gains a bearish slope, well above the current price and supporting a new leg lower, particularly on a break below 0.7260, the immediate support.
China’s Central Bank devaluated the Yuan by 1.9%, the most on record, triggering a sell-off in commodity currencies that are still on.
The US data was also tepid, as worker productivity output increased at a 1.3% annualized rate from April through June, following a 1.1% decline in the first quarter of the year.
Considering the overall technical and fundamental outlook, buying the pair around current levels appears to be a good strategy in short to medium term if we get a bullish pin bar or bullish engulfing candle on a daily chart.
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