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AUD/CNH staged a ~4,100 pip peak-to-valley rout over the last five months, with the downswing driven primarily by the Australian side of the equation. The AUD has come under increasing pressure recently from the escalating local Covid-19 outbreak and resultant mobility restrictions.
- The rate charted a dragonfly Doji candlestick on Wednesday, but has resumed losses today and last trades -60 pips at CNH4.7502. It still sits within the confines of yesterday's range.
- The emergence of a death cross on the daily chart earlier this month has lent further support to the bearish case and saw the rate extend losses.
- The key near-term layer of support is located at CNH4.6854, which represents the 38.2% retracement of the 2020 - 2021 rally. The rate rejected that level twice in Oct/Nov 2020, completing a double bottom pattern in the process, which heralded a move to a new cycle peak.
- Should bears manage to force a break through CNH4.6854, they could take aim at the CNH4.5500 area, which limited losses in May 2020. On the topside, bulls need to retake Jul 14 high of CNH4.8385 and Jul 9 high of CNH4.8559 to get some brief reprieve.
Fig. 1: AUD/CNH
Source: MNI - Market News/Bloomberg