With the Americans and the Chinese agreeing to put a moratorium on new tariffs, the Australian dollar got a bit of relief as it is so highly levered to the Chinese economy, as Australia supplies the manufacturing sector in China most of its raw materials. Beyond that, it supplies a lot of the construction companies in the Chinese mainland as well.
AUD/USD Video 05.12.18
At this point, if we do break down and sliced through the gap that kicked off the week, then we could fall towards the 0.7250 level which has been a bit of a fulcrum for price. We have recently broken through a major downtrend line though, so I would not be surprised at all to see buyers underneath. Once we break above the 0.75 handle, then I think we have officially change the trend overall for the longer-term trend, and investors will be looking to buy the Australian dollar as well.
The alternate scenario of course is that we break down below the 0.7150 level, opening the door to the 0.70 level underneath which will have major implications when it comes to support and of course psychological importance. If we were to break down below that level it opens the door to the 0.68 handle. However, I think that we are starting to see the beginning of the end of the major downtrend in the Australian dollar, and if the Americans and Chinese can come together with some type of agreement, that should send this market much higher in a very short amount of time.
This article was originally posted on FX Empire
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