AUD/USD: Firm Bearish Phase in Place, Eyes on Trend Lows

The Australian Dollar remains one of the most vulnerable pairs to extends its well-established downward bias. First and foremost, one must be reminded that in the last CoT report, the smart money added shorts aggressively, reinforcing the notion that the downward pressures are here to stay. On top of that, the counter-intuitive moves of dismissing a positive Aus GDP for Q2 earlier this month and the failure to exploit the 'risk on' flows on Tuesday is further evidence of the fragility by the Aussie. This alone should speak loud and clear that the market is utilizing the AUD as a proxy instrument to reflect the uncertainty in emerging markets and the China vs US trade war.

Looking at the most correlated asset the Chinese yuan is making new lows and that's not supporting glows into the Aussie, while the DXY shows a bullish structure post US NFP last Friday. One may argue that with gold and the Aus vs US yield spread off lows, the breakout of new lows should find enough demand pressure to limit the risks of sharp falls vs more contained and gradual slide in prices. When all factors considered, price action, fundamentals, moves related to sentiment, all point towards further depreciation.