Options Market Indicates Vulnerability for AUD/USD. Levels to Watch.

AUDUSD Daily:

Technical Overview:

• Consolidation of Downtrend: The price is consolidating in a downward trend.
• Testing Resistance Zone: Testing an area with multiple resistance levels.
• DeMarker Indicator: The DeMarker indicator is coming out of the overbought zone, indicating weakening bullish momentum.
• Megaphone Pattern: The chart shows a Megaphone pattern with a “7” and Sequential has started a downward count.
• Bearish Engulfing & Doji: Price action includes a bearish engulfing pattern and a Doji candle.
• Break of Upward Trend Channel: There’s a break in an accelerated upward trend channel.
• Support from Moving Averages: The 65-day and 200-day moving averages are acting as support for the upward movement.

In Conclusion:

I expect the price to test the 65-day moving average at around $0.6659. If it breaks below this level, it will likely test the 200-day moving average around $0.6616.

Alternative Scenario:

If the price breaks above the resistance zone, I expect it to test the 38.2% Fibonacci level at around $0.6816. If it breaks this level, it will likely move towards the horizontal resistance at $0.71605.

Fundamentals:

AUD/USD is vulnerable to a sharp decline if aggressive traders target a hedge zone slightly below 0.67 this week, especially with reduced liquidity due to U.S. Labor Day. Signs are already emerging in Asia where fast money is selling the Australian dollar as iron ore prices drop amid weak economic data from China. There are options targeting levels down to 0.6570, which could encourage bearish sentiment towards the Australian dollar, potentially triggering a domino effect once hedging activity begins. Additionally, Australian bond yields might decline due to the China effect, putting further pressure on AUD/USD, as noted earlier by Garfield Reynolds.