AUD/USD Price Outlook: Aussie Defends 0.7200 Level as VIX Jumps
AUD/USD PRICE OUTLOOK: AUSTRALIAN DOLLAR DROPS SHARPLY TO TECHNICAL SUPPORT AMID VOLATILITY FLAREUP
- AUD/USD price action tumbled lower on Monday as the anti-risk US Dollar strengthened
- Australian Dollar bulls defended a critical technical support level near the 0.7200-mark
- S&P 500 VIX Index exploding higher could indicate market sentiment remains downtrodden
The Australian Dollar came under fire Monday as markets swooned on the back of rising risk aversion. Sentiment-linked AUD/USD price action plunged 120-pips from Friday’s close, but the major currency pair has since clawed back nearly a quarter of the move with Aussie bulls defending a key support zone around the 0.7200-handle.
AUD/USD PRICE CHART: DAILY TIME FRAME (26 MAY TO 21 SEP 2020)
Despite a notable relief bounce off this level staged during late trade, the Aussie-Dollar still notched a close below its 50-day moving average. This could increase potential for a retest of the 0.7200-price level underpinned by month-to-date lows. A breakdown of this critical technical barrier, if confirmed with follow-through, elevates the probability of a change in medium-term trend from bullish to bearish. Taking out the 08 September intraday swing low could cause AUD/USD price action to accelerate lower toward channel support before the 0.7000-level comes into focus as another potential downside target.
AUD/USD PRICE CHART WITH VIX INDEX OVERLAID: DAILY TIME FRAME (DEC 2019 TO SEP 2020)
The pro-risk Australian Dollar could also face heightened selling pressure if the VIX Index, or fear-gauge, continues snapping higher as market sentiment deteriorates further. That said, commentary from Fed Chair Powell due later this week might talk down the US Dollar with the prospect of more monetary intervention. On the other hand, if the upcoming release of global PMI data disappoints, risk aversion could get reignited and steer AUD/USD price action lower.
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