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Forex: AUD/USD, breakout of 1.03 confirms bear domination

The bearish pressure in the Australian Dollar continues in crescendo, with the pair adding further losses to break into fresh lower ground - cheapest since Oct 25 - at 1.0270 before a consolidation just above it.

The sharp fall this week unravels a torturous choppy activity between 1.0350 and 1.06, with Thursday's losses and subsequent NY close near day lows suggesting bears have finally taken full control. In the last European session, a half-hearted bounce attempt by bargain hunters barely lifted the AUD above 1.0330, evidence that buyers are fading.

The depreciation on the Australian Dollar has come fast and furious, with the impulsiveness of the declines being counter-attacked by timid/corrective pullbacks. The clean breakout of 1.03 has now opened the doors for a potential test of 1.0250, significant level of support as per sequence of lows last April 2012. Below, next round 1.02 may be the target.

It will be an arduous task for bulls to regain upward traction if they aim to revert the current bearish outlook for the coming days. First, there is the imperial need to retake 1.03 followed by 1.0340 up to 1.0360 contention area, quite selling-sensitive as notable static resistance layers lie around. Only above the latter longs may start to see some light at the end of the tunnel.

In view of Sean Lee, founder at FXWW, "the outlook remains bearish, yet losses will be slow I think as dealers report plenty of bids at regular levels on the downside." According to the analyst, "the main target is range lows near 1.0150 so I’d tend to buy any sharp intraday dips towards this level." He tips offers to be solid near 1.0330/40.

However, is not all gloomy for the bulls, not if one has a longer term approach to the outlook of the pair, said Andrew Salter, FX Strategist at ANZ, in a research report published yesterday.

The analyst notes: "Taking a somewhat longer perspective the fundamentals are sound. Current level represent a clear buying opportunity. Formidable support from foreign direct investments suggests any fall will be easily absorbed. We have been long AUD/USD from November last year with an entry point of 1.0300, targeting 1.0700. We add a stop loss at 1.0240."

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