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Title: AUD/USD Price Analysis: Gets smashed towards 0.7050 after rejection at 200 DMA

August 15, 2022 03:45 AM ET

By: AnalysisWatch

AUD/USD falls sharply towards 0.7050 as selling interest in the Australian dollar continues unabated amid resurgent concerns over China's economic recovery.

Disappointing Chinese economic data for July has raised concerns that the post-pandemic economic recovery in the world's second largest economy is weak. This has shaken market sentiment and weighed heavily on the Chinese proxy and the higher-yielding AUD.

In addition, tensions between Washington and Beijing are rising following the arrival of a U.S. delegation to Taiwan, especially after House Speaker Nancy Pelosi's controversial visit. Geopolitical risks between the U.S. and China are also negatively impacting the AUD. Commenting on the visit of a U.S. congressional delegation to Taiwan, expert Han Peng of the China Global Television Network (CGTN) said Beijing may tighten its military blockade of Taiwan and economic sanctions against the island.

The U.S. dollar emerges as the only winner from the risk-off scenario, extending Friday's rally to 106.00 against its major peers. Attention turns to Tuesday's RBA minutes and Wednesday's FOMC minutes for new trading opportunities for the pair.

From a short-term technical perspective, the daily structure looks interesting as price has hit the critical horizontal 200-day moving average (DMA) at 0.7121 for the third consecutive trading day.

This has put AUD bulls in trouble and triggered a pullback towards the psychological support at 0.7050. The next important downside target is at 0.7000, the round number.

However, bulls remain hopeful as the 21 DMA crossed the 100 DMA to the upside, which is a bullish signal.

The 14-day relative strength index (RSI) has turned south but remains well above the midline, suggesting that the sell-off could be viewed as a good buying opportunity.

If the bulls manage to defend 0.7050, a rebound towards 0.7100 should be in the cards. The 200 DMA barrier will be back on the radar of buyers on a renewed upward move.

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