AUD/USD tests waters below key support as downside momentum continues

The surging optimism from China before the Golden Week holiday gave the aussie a noticeable boost. But that has largely faded as the dollar rebounded and also as investors are coming off cloud nine on the China optimism. Chinese equities have been rather shaky since the return from the holidays and that is continuing to this week. Likewise, the yuan is down against the dollar since the start of the month – now seen at its lowest in five weeks.

That is putting pressure on AUD/USD, despite a more positive risk mood in broader markets. The pair has fallen below 0.6900 this month and is now meeting a key support level on the daily chart.

The 100-day moving average (red line) was a key level in holding the declines in September and is now in focus again. The level is seen at 0.6693 currently.

Break below that and sellers will turn the momentum in the pair to being more neutral. That will then draw attention to the 50.0 Fib retracement level at 0.6645 and the 200-day moving average (blue line) at 0.6626 next.

Given little to work with in trading this week, the technicals are a key focal point for traders in chasing any moves.

So, keep an eye out on those levels as paired with a couple of other dollar pairs, could be hinting at a potential for a broader move in the greenback during the week.

This article was written by Justin Low at www.forexlive.com.