AUDUSD has dropped as geopolitical tensions increased, affecting how the market feels. The conflict between Iran and Israel, along with US involvement, led investors to seek safer assets. This shift negatively impacted high-beta currencies, like the Australian dollar. On this day, the AUDUSD pair fell by -1.01%, marking a significant decline against the US dollar. Recently, the pair broke below the 200-bar moving average on the 4-hour chart at 0.64616 and also fell beneath a supportive uptrend line from May. Prices continued to drop, falling past the recent swing low of 0.6407, which increases short-term risks for sellers. The next target for sellers is the May swing base at 0.63572, with a potential further decline to the 38.2% retracement level at 0.63084.

Short Term Risk for Sellers

If the currency pair cannot maintain support at these levels, it may decline further towards the 50% retracement zone around 0.6233. The overall trend is downward, with traders eyeing 0.64072 as a potential target for a bounce back. If this level is breached and held, it could present buying opportunities and support for the Australian dollar. This article highlights a clear decline in the Aussie dollar against the US dollar, driven mainly by rising geopolitical tensions linked to the Middle East. These tensions have prompted investors to shift their capital to safer investments. Given the Australian dollar’s high-beta status, it’s not surprising it faced pressure in such conditions. Typically, high-beta currencies struggle when investors become more risk-averse, which we are currently seeing. Breaking through both the 200-bar moving average and the uptrend support line sent a strong technical signal. This move indicates that the current bearish pressure is not just a temporary dip but could extend further. The lower low at 0.6407, which previously slowed selling, hasn’t provided any support. Moving below this level indicates new downside momentum.

Potential Bounce

Now, we need to monitor the 0.63572 level, an old swing base. A drop below this level could increase selling interest, particularly during high-volume trading sessions or due to further international developments. Below this, we have the 38.2% retracement level at 0.63084, but the 50% retracement at 0.6233 marks a crucial change. A drop to this zone would suggest more than just short-term weakness; it could indicate a major shift in trader sentiment regarding risk. For a potential bounce, the 0.64072 level serves as a crucial benchmark. If the pair moves back above this line and holds, pressure might ease, and sellers might begin to back off. This wouldn’t mean a complete trend reversal, but we could see a change in sentiment or at least a pause in recent selling. Observing trading volume during such moves is essential to determine if they result from repositioning or merely short-covering. In this environment, it’s important to assess risk tolerance carefully and avoid assuming that the market will revert to previous averages without confirmation. Instead of chasing small price ranges, it’s vital to wait for re-testing of the next support zones and see how convincingly they hold. As global uncertainties push rates decisions and economic data to the sidelines, technical levels become increasingly significant. A clear and thorough setup will be more useful in the coming sessions than relying on past market behaviors. Create your live VT Markets account and start trading now.

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