AUD/USD is dragged down to lowest levels since February 2016

It's not that it wasn't coming but the aussie finally looks set for a test of the 0.7000 handle against the dollar now. After several failed attempts to move towards the key psychological level, today's market worries is proving to be one too many reasons for aussie buyers to get out of the way.

Risk continues to stutter as US equity futures sit lower by more than 1.0% on the day but the key story has been that of the yuan as it threatens to move beyond its lowest levels in a decade against the greenback.

For AUD/USD, price now threatens a break below support from the November 2015 low @ 0.7017 but the key level to watch out for now is the 0.7000 handle. Expect more stops to get run when we get there and if risk continues down this ugly path, a break lower will send buyers into hiding no doubt.

However, as mentioned before, don't discount positioning data. Aussie shorts are at a point where it's screaming for covering and a break below 0.7000 may convince longer-term sellers to book profits and get out before risk recovers and we see a short squeeze back above the psychological handle.