AUD/USD Breaks 0.73 Handle, Vulnerable to Further Losses

AUD/USD Breaks 0.73 Handle, Vulnerable to Further Losses

13 May 2016, 06:13
Roberto Jacobs
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AUD/USD Breaks 0.73 Handle, Vulnerable to Further Losses

AUD/USD is trading on a very heavy note during 'risk off' Asia today, with the exchange rate breaking through the 0.73 round number, resulting in a cascade of stop loss orders being tripped, taking the rate down towards 0.7285.

Intrinsic valuation of the Aussie moving lower

The risk averse environment has wreaked havoc the Australian Dollar and other risk assets, with the VIX spiking higher (SP500 futures sharply lower), US 30-year Treasury bonds also catching a solid bid tone, all the while the 10-year Australian yields are collapsing. Throw into the mix the RBA on rate cutting mode, having to deal with low inflation prospects and a housing bubble about to burst, and the pressure on the Aussie continues to be justified as market participants price in all these AUD bearish elements into the price.

AUD/USD key levels

The decisive breakout below 0.73 opens the doors towards 0.7250 strong horizontal support (former resistance throughout Feb), ahead of an acceleration to reach 0.72 round number. On the upside, 0.73 becomes immediate resistance, followed by levels between 0.7315 up to 0.7340, the latter being Asia's POC (Point of Control or where most of the volume traded); even a break above sees 0.7350 as another tough level too crack.


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