audusd poised for breakdown to new six year low 1694252015

After initially rallying, AUD/USD (daily shown below) retreated on Monday to approach its new six-year low of 0.7370 that was established just last week. This decline occurs after a Greek bailout agreement was reached over the weekend that contributed to an increased likelihood of a US rate hike this year and a corresponding strengthening of the US dollar. It also occurs nearly a week after the Reserve Bank of Australia (RBA) opted to hold its benchmark interest rate at 2%, a record low.

Furthermore, within last week’s RBA statement Governor Glenn Stevens affirmed that “the Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.”

With the potential for this further Australian dollar decline as well as the substantial probability of a Fed rate hike this year supporting the US dollar, along with a strongly prevailing downtrend for the AUD/USD currency pair, the outlook for AUD/USD remains both fundamentally and technically bearish.

Throughout June, the currency pair formed a large bearish flag pattern that was broken down in late June, pushing the currency pair into the current bearish continuation below the prior multi-year low of 0.7532 that was established in early April.

Having hit and dropped below its original downside support target of 0.7500 last week, AUD/USD could soon approach a further key target to the downside around the 0.7300 support level, with a possibility of a continued decline towards the 0.7000 psychological level.

Short-term resistance to the upside within the context of the strong bearish trend currently resides around the noted previous support level of 0.7500.