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Aussie break of 0.9700 reveals new downside potential

FXstreet.com (Barcelona) - The Aussie finished the day sharply lower, down 108 pips to end at 0.9868 which is the lowest daily close for the pair since Nov 2011.

According to analysts at NAB Global Markets, “the Australian Dollar slumped to USD0.9662; less than a cent above last year’s USD0.9582 low point. Price action around current levels will be crucial and the failure to break even above 0.9850 this week shows the weight of offshore selling interest even as domestic real money and corporate buyers of AUD have been seen over the last couple of days. And, the lower the AUD, arguably the less the RBA will feel it needs to do on rates.”

From a technical perspective, the pair remains under the bearish influence of massive ‘pennant’ continuation pattern which was confirmed last Friday with the weekly close below 0.9880. The measured move target of this pattern is all the way down near 0.9060, which may help keep a ‘sell the rally’ mentality intact during the coming weeks. From a short term perspective, The FXStreet.com Trend Index remains in slightly bearish set up on the 1 hour chart, while the OB/OS index reads oversold. Initial support comes in at 0.9580 (weekly low from early June 2012), while first resistance comes in at 0.9720 (the 20dma on 1 hour chart).

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