The Australian dollar broke down significantly during the course of the week, slicing through the 0.67 handle at one point. This was in reaction to the three central banks in Asia cutting interest rates, which of course has people thinking the whole neighborhood might be bad. Beyond that, the Australian economy is so highly levered towards the commodity market and of course the growth of China and other Asian countries.
AUD/USD Video 12.08.19
This hammer of course is a very bullish sign, but at this point in time I think we are probably better off selling this pair at the first signs of exhaustion. You may have to look to the daily chart to get your intro signal, but we are obviously in a very negative trend. This oversold condition probably features some type of relief rally that needs to be sold into.
The alternate scenario of course is that we break down below the hammer which of course is extraordinarily negative. The 0.65 handle underneath is a target at this point, and I believe that the 0.69 level above will be an area where sellers may come back in. As long as there are concerns about the US/China trade war, there will also be a lot of problems with the Aussie dollar. At this point, it doesn’t look like we are close to any type of resolution, so is very likely that we will fade rallies and that certainly is what I’m looking to do going forward.
Please let us know what you think in the comments below
This article was originally posted on FX Empire
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