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#1 24-11-2021 17:39:42

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3176
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AUD/USD: is it safe to buy the pair after this month's huge drop?!

AUD/USD: is it safe to buy the pair after this month's triple-digit tumble?


The Australian dollar lost three hundred pips this month against its US counterpart. Now that the end of the trading month is near, is it safe to buy?

One of the biggest moves in the market in November was the decline of the AUD/USD from over 0.75 to the current 0.72. While the USD is extending its gains for the year, there is no end in sight for the AUD's downward trend.

This is despite the fact that Australia is facing a better economic situation in the coming period as summer arrives in the southern hemisphere. While new bottlenecks threaten economies in Europe, warmer temperatures in the south mean that Australia will have to deal with the virus. Thus, the currency should reflect economic strength - but this is not the case with the AUD/USD exchange rate, at least not yet.

We note that the Central Bank of New Zealand has already raised the official spot rate twice. Is it out of the question that the Reserve Bank of Australia will do the same? Even if it does, it's not clear that the downward trend in AUD/USD will reverse. In fact, the NZD/USD exchange rate is down more than half a percentage point today despite the fact that the Reserve Bank of New Zealand is still raising rates.

In other words, it is the strength of the US dollar that is in the driver's seat, and the upcoming tightening of financial conditions in the US is more important to market participants.

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AUD/USD pair approaching critical support zone

The 0.7100-0.7150 area has proven to be an important support in the past. The price has bounced back into the zone twice, and it now looks like the support will be tested again.

Truth be told, the pair has been trading in a bearish tone all year. Even the rallies turned out to be just another opportunity to sell a little more.

Ahead of the FOMC minutes and the end of the month, the AUD/USD pair looks weak. Contrarian traders should be cautious as the market has broken below a bullish channel and a lower level for the rest of the year is possible.

So far, the support zone has held twice. Will the market bounce back again?

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"Anything worth having is worth going for - all the way." - J.R. Ewing

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