AUD/USD: bears have eyes for a test below the 0.78 handle

Currently, AUD/USD is trading at 0.7821, up 0.01% on the day, having posted a daily high at 0.7826 and low at 0.7817.

AUD/USD has stablised at the bottom of the overnight range which was all one way in favour of the greenback. Commodities were part of the act following a fall in iron ore by 1.4% overnight and a negative day for the Aussie was underpinned by positive data for the US economy, echoing the beliefs of Fed's Dudley yesterday in respect to the economy being on track and deserving of a further rate hike this year.  

However, FOMC member Kaplan repeated last Friday’s comments about being patient on rate hikes. Analysts at Westpac have noted that the AUD has retraced 50% of the June/July rally, and suggested that it should extend below 0.7800 if the US dollar extends its gains.

AUD/USD 1-3 month: 

Further out, the analysts at Westpac explained that if the RBA remains firmly on hold, as we expect, and the US dollar rises on tighter Fed policy, then AUD/USD could fall to 0.76 by year end. (9 Aug)

FOMC minutes preview - Nomura

AUD/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that most of the pair's decline can be attributed to dollar's strength. "Further slides are likely according to technical readings in the 4 hours chart, as the price moved further below its 20 SMA and broke below its 200 EMA for the first time in two months, while technical indicators maintain their bearish slopes near oversold readings," she explained, adding, "July 18th low at 0.7786 comes as a strong support for this Wednesday, with a break below it opening doors for a steeper decline towards the 0.7650 region during the following sessions."

Only above the 0.8065 level the 0.8162/66 May 2015 peak and 50% retracement can be seen, according to analysts at Commerzbank. "Above there lies the 0.8295 January 2015 high. The longer term outlook is positive. The market has broken higher from a large triangle formation that targets eventually 0.8715 (one year + target)," argued the analysts.