AUD/USD Breaks Through 0.7400 Handle
Extending its slide further during European trading session, the AUD/USD pair dropped below 0.7400 handle and has now moved within striking distance of 100-day SMA support.
After losing ground on Thursday on the back of weak Chinese CPI report. Adding to it broad US Dollar rebound amid global risk-off environment, continued exerting pressure on the Aussie.
Prior to Thursday's sharp reversal, the AUD/USD pair had been gaining ground partly due to broader US dollar weakness led by dismal NFP print for the month of May. This week's rise for the AUD/USD pair was also supported by unexpectedly strong Q1 Australian GDP and status-quo RBA monetary policy stance.
The pair, however, failed to capitalize on the up-move and a follow through weakness below 100-day SMA support would open room for further depreciating move in the near-term.
Going forward, a bunch of macroeconomic data, which includes Industrial Production, Fixed Asset Investment and Retail Sales, are slated for release from China over the weekend would continue to drive sentiment surrounding the major.
Technical outlook
Gregor Horvat, Chief Technical Strategist at EW-Forecast notes, "AUD/USD made five waves down from 0.7836 which is the most important and strong evidence of a bearish trend. However, we always need to be aware of corrective reversals, which are short-lived patterns against that five wave structure. That said, recent upward reversal is probably a new contra-trend pattern that will ideally look for a top at 0.7450-0.7500 resistance area from where new sell-of will be expected in days ahead. So far we have seen a nice turn down in the last 24 hours from 0.7500 which suggests that more weakness can be in play, but we still want to see 0.7310 broken for the final bearish confirmation."
