The Australian dollar rallied quite stringently during the week, slamming into the 0.725 level. This is a market that continues to be negative overall but was oversold. The hammer from the previous week of course was the initial sign.
The Australian dollar has rallied a bit during the week, but has failed at the first signs of trouble, namely the 0.7250 level which was selling previously. Looking at this chart, it’s easy to see that we are in a downtrend, and this is mainly due to the Sino-American relations as trade talks aren’t happening, but tariffs are. That should continue to punish the Chinese economy, and by extension the Australian economy will suffer as a result.
What you don’t see on this chart is that the daily candle stick is a shooting star. This of course is a negative sign and I think that shorter timeframe traders are starting to doubt this rally, as they very well should. However, if we can clear the 0.73 handle, the market is likely to go to the 0.75 level after that. Otherwise, if we break down below the 0.72 level on the Friday close, I think that the market probably drops down to the 0.70 level underneath. Remember, unless we get some type of good news involving the Sino-American situation, the Australian dollar will continue to struggle overall.
That being said, we are oversold so I think the longer-term play will be to sell this market on rallies. That won’t change until the situation between the Americans and the Chinese changes. I don’t see that on the horizon, and I think it’s only a matter of time before the sellers return on any short-term rally as the longer-term outlook for Australia is sketchy at best.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.