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AUD/USD Violates Triple Bottom - Three Black Crows to Drive Selling!


The AUD/USD pair closed at 0.71425 after placing a high of 0.72270 and a low of 0.71331. The AUD/USD pair crossed 0.7200 level on Friday in the earlier session and reached the highest level since February 2019 ahead of Chinese PMI data. After gaining five consecutive days, AUD/USD pair posted losses on Friday amid profit-taking in the U.S. dollar.

At 06:00 G.M., the Manufacturing PMI from China Roseto 51.1 against the forecasted 50.8 and supported China-proxy Australian dollar. The pair AUD/USD moved in the upward direction after the release of Chinese PMI data.

On the other hand, the U.S. data came in mixed and kept the U.S. dollar high. At 17:30 GMT, Personal Spending from the U.S. rose to 5.6% from the expected 5.3% and supported the U.S. dollar. The Chicago PMI also supported greenback when it exceeded the expectations of 44.0 and came in as 51.9. The U.S. dollar pullback weighed on AUD/USD pair that made the pair to post losses.

The U.S. dollar was on the back foot from the past ten days due to the resurgence of coronavirus cases in the U.S., escalating tensions between the U.S. & China and dismal data and rising concerns over the future course of the economy.

On the other hand, the harmful US-China trade deal could also be associated with the reports that the Dragon Nation will require huge buying of U.S. farms to meet the import target, which has raised the fears of further hardships for the Sino-American trade deal. Apart from this, the Global Times (G.T.) editor Hu Xijin's previous comments on the United States coronavirus propaganda also fueled the on-going tussle.

The U.S. Congress failed to agree on the much-awaited extension of the unemployment claims benefits as they expired on Friday. The U.S. policymakers also could not agree over the much-awaited fiscal package to control the pandemic's economic impacts, as Democrats and Republicans still have differences over the size of the package. This, in turn, made the S&P 500 Futures to mark 0.30% losses to 3,260. The same portrayed the market's risk-off mood and gave extra strength to the safe-haven assets.

However, the downticks in the equity market could also be associated with the fears that the economic recovery in the U.S. could undermine amid the resurgence in coronavirus. As per the latest reports, the number of cases globally crossed 17 million, while confirmed cases reached 4.4M and more than 150,000 deaths toll in the U.S. Elsewhere, the Australian state of Victoria recorded 429 new coronavirus cases on the day, with 13 death recorded so far. Apart from Aussie, Tokyo reported 292 new coronavirus infections so far on the day.

On Thursday, the US GDP fell by record 33% and weighed heavily on the U.S. dollar. However, the oversold condition in the U.S. that was already under pressure from the past few weeks gave a push to U.S. dollar prices after investors started to take profit. This correction weighed on AUD/USD pair, and the pair dropped below 0.7200 level.

On the US-China front, the U.S. strengthened its economic pressure on China's Xinjiang province on Friday, after levying sanctions on a powerful Chinese company, and two officials against human rights abuses on Uighurs/ Muslims and other ethnic minorities.

The U.S. Secretary of State Mike Pompeo said that the human rights abuses by the Chinese Communist Party in Xinjiang province against Muslim minorities were the stain of the century. The rising conflicts in US-China lead to the depressed Aussie and losses in AUD/USD pair.

Daily Support and Resistance
S1 0.698
S2 0.7074
S3 0.7109
Pivot Point 0.7168
R1 0.7203
R2 0.7262
R3 0.7356

On the technical front, the AUD/USD pair is trading with a bearish bias at 0.7100 level after violating the triple bottom support level of 0.7120 level. The closing of candles below 0.7120 level suggests the odds of further selling in the Aussie. Considering the 4-hour timeframe, the AUD/USD is forming a three black crows pattern on the 2-hour timeframe, which may drive further selling bias in Aussie. On the lower side, the next target seems to be 0.7067 level, while the bearish breakout of 0.7060 can lead Aussie prices further lower towards 0.7019 level. Good luck!

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