. Dollar firm at 2-decade highs as Aussie - Capital Street fx

Dollar firm at 2-decade highs as Aussie

16 May 2022

AUD/USD is trading down 0.06% at 0.6932

The Australian dollar and the Chinese yuan came under pressure from weak Chinese economic data on Monday, while the U.S. dollar consolidated gains near a 20-year peak.

Comments by ECB policymaker Francois Villeroy de Galhau that the euro’s weakness could threaten the European Central Bank’s efforts to steer inflation towards its target pulled the euro from lows but sentiment was downbeat.

China’s retail and factory activity fell sharply in April as extensive COVID-19 lockdowns confined workers and consumers to their homes. The offshore Chinese yuan held near a September 2020 low of 6.8380 yuan hit last week.

“Increasingly, the risk is that zero-COVID (policy in China) may stay in place even past the party conference in the third quarter and into the winter season,” Barclays (LON:BARC) strategists said in a note downgrading its forecasts for the euro and the yuan for the rest of 2022.

Moves were sharper in the Australian dollar, which fell 0.68%, which is most exposed to the Chinese economy. It trimmed losses but was down 0.5% in London trading.

The dollar index was at 104.57, having briefly crossed the 105 level on Friday, its highest since December 2002, after six successive weeks of gains. Weekly positioning data showed investors built their long dollar bets.

On technical fronts AUD/USD RSI stood at 41.74 and currently it is trading above 5 days MA & below 10 and 20 days MA. So, SELL position can be taken with following target and stoploss:

TRADE SIGNAL – : AUD/USD – SELL: 0.6929, TARGET: 0.6849, STOP LOSS : 0.6981