This technical analyst says there are 'very few obstacles' to prevent the Aussie dollar falling even further

Martin Steinthaler / Hoch Zwei / Getty ImagesTechnical support is lacking.
  • The Australian dollar has been slammed since late January, especially against the greenback.
  • David Coloretti, Technical Analyst at The Markets Academy, says there’s very little from a technical perspective to prevent the AUD/USD from falling even further.
  • Based on technicals, he has a three-month price target of .6900 for the AUD/USD. It currently trades at .7114.

The Australian dollar has been slammed since late January, losing 12.5% against the greenback and about half that amount in trade-weighted terms.

Divergent monetary policy outlooks between Australia and the rest of the world, as well as concerns about the impact of a protracted trade war between the US and China, has proven to be a potent mix, completely overriding the tailwinds provided by higher commodity prices and a pickup in Australian economic growth.

As such, the Aussie now trades at more than two year lows against the US dollar and the currencies of its major trade partners.

The question many are now asking is whether the selloff will continue, especially as pessimism towards the Aussie, at least based on current positioning from speculators, is now at the highest level for several years.

While no one knows the answer for sure, David Coloretti, Technical Analyst at The Markets Academy, says there’s very little from a technical perspective to prevent the AUD/USD from falling even further.

A lot further.

“AUD/USD currently presents very few obstacles with regard to the downtrend,” he says.

“New lows in price are confirmed by new lows in momentum across the major time frames and major support levels are lacking, since multi-year lows at 0.7145/60 were broken last week.”

The daily chart below from the National Australia shows the downtrend the AUD/USD has been in since it hit multi-year highs in late January, including the break below previous lows struck in late December 2016 in recent days.

NAB

Coloretti says the AUD/USD has the “potential to find some interim support below 0.70”. However, he says the next level of major support doesn’t kick in until the “bottom of the 2011/2016 downtrend at 0.6800/50”.

From a technical perspective, he has a one-month target of .7050, not far below its current level of .7114. However, on a three-month time horizon, that target extends to .6900.

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