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Christopher Lewis
AUD/USD daily chart, May 16, 2019

The Australian dollar drifted a bit lower during trading on Wednesday as we continue to see quite a bit of fear when it comes to global growth and risk assets. Keep in mind that the US/China trade relations will continue to take front stage, and of course the Australian dollar is highly levered to the Chinese economy. Because of this, I believe this market will be very difficult to trade, not to mention the fact that we have a massive amount of support just below. This sets up an interesting scenario.

AUD/USD Video 16.05.19

The Australian dollar has a massive support zone that extends from 0.70 to the 0.68 level underneath. This 200 PIP range is crucial on longer-term charts as well, so I think that the market is going to struggle to break down. It doesn’t mean it can’t, rather that it probably won’t do so suddenly. Momentum simply won’t be on your side when it comes to shorting this pair.

However, if we get some type of good news out of the US/China trade relations this market could shoot straight up in the air as we continue to see the correlation between Australian and China as the Aussies provide so much in the way of raw materials. With that, this is a one-way trade but we don’t have the good news necessary to start buying the Aussie. If we break above the 0.70 level, we will more than likely go looking towards the 0.7050 level, and a break above there could send this market up to the 0.72 handle. If we were to break down below the 0.68 level, that would be an extraordinarily negative sign and could send the Aussie down to the 0.65 handle.

Please let us know what you think in the comments below

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