AUD/USD slumps below 0.7000 amid risk-off sentiment, and China's Covid-19 restrictions

• On Monday, the AUD/USD recorded losses for the third straight trading session of 1.50%.
• A dismal market mood and China’s Covid-19 zero-tolerance policy are a headwind for the AUD/USD.
• AUD/USD Price Forecast: To aim towards 0.6500, once AUD/USD bears break the 0.7000 figure.

The Australian dollar slumps towards near two-year lows levels, which were last seen in July 2020, below the 0.7000 threshold, amidst a dismal market mood. At the time of writing, the AUD/USD is trading at 0.6964.

The market mood remains negative, as shown by US equities recording substantial losses amidst a high US bond yield Treasury environment as traders question whether the Fed would be able to tackle inflation without spurring a recession. Alongside China’s continuing Covid0-19 crisis, which already hurt PMIs, and its exports added a pinch of salt to the already battered global economic slowdown. Also, the Ukraine-Russia jitters remained in the backdrop as market players await a resolution of the conflict.

Meanwhile, since the end of the last week, Fed speakers began to cross wires. On Monday, Atlanta’s Fed President Raphael Bostic said that he sees two or three 50-bps increases as a baseline but reiterated that he is open to adjusting. Bostic added that risks are two-sided, and the economy could go multiple ways. He said 75-bps rate hikes are not his baseline, but he’s not taking anything off the table. The Atlanta Fed Q2 GDPNow tracker reduced the expectations of US growth from 2.0% to 1.8%.

On the Australian side, Business and Consumer Confidence, Retail Sales, and RBA’s Bullock speech could shed some light regarding the Australian economy.

In the week ahead, the US economic docket would reveal on Tuesday, Retail Sales, followed by Wednesday’s inflation figures and Friday’s Consumer Sentiment. As global economic growth threatens to be disrupted by China’s Covid-19 zero-tolerance policy and central bank tightening, AUD/USD traders need to be aware of the previous-mentioned data.

AUD/USD Price Forecast: Technical outlook

The AUD/USD is severely downward pressured and once broke below the 0.7000 figure, opened the door for further losses. In the MACD-histogram, albeit showing a positive divergence, the MACD-line aims lower, widening its distance from the signal line, further cementing the downward bias.

The AUD/USD first support would be June 2020 swing low at around 0.6776. Break below would expose the May 2020 swing highs around 0.6616. Once cleared, the next support would be 0.6500.

Key Technical Levels