Australian Dollar Primed for a Sell-Off

Key points

• Aussie bulls facing pressure after break out from the neckline
• Lack of high impact economic data also a factor for Australian dollar weakness

The Head and Shoulder pattern, which has kept Aussie bulls in play from February 2021, has been breached. This comes after the price broke below the neckline, exposing the pair AUDUSD to an influx of sellers. The Australian dollar is under pressure from global markets.

Soft economic prints from this week’s calendar have left Aussie bulls without any support against a resurgent US Dollar. While both nations are making progress with their vaccination programme, the US dollar strength thrives on the back of rising treasury yields and positive economic sentiments.

Data release from Thursday’s economic event came out mixed as retails sales data for February came out better than expected with a release of -0.8% against -1.1%, while trade balance data missed expectations showing a decline with a release of 7.53m against 9.95m.

China, which happens to be a major trade partner and also receives metal exports from Australia, saw Caixin Manufacturing PMI slip to 50.6 in March 2021 from 50.9 in February.

Technical outlook

AUDUSD is likely to test the next support level from a technical point of view, which comes at 0.7500 after breaking out from a Head and Shoulder pattern. With no high impact economic data to boost the Australian dollar for the week and the market still preparing for the NFP data release, this pair is one traders can keep an eye on. A daily close below the neckline is likely to increase more selling pressure.