The Australian dollar unfortunately is highly levered to China. While this has kept the Australian economy out of recession for over 20 years, it seems that the gravy train may be slowing down finally. Beyond that, it’s very likely that the demand for Australian hard commodities will weaken in China due to the US/China trade talks going absolutely nowhere. If that’s going to be the case, it’s very likely that we will eventually test the bottom of this 200 point range, which I had been talking about as being so supportive. That has a target of 0.68 underneath. If we break down below there, things could get rather ugly from a historical standpoint.
AUD/USD Video 20.05.19
Adding more fuel to the fire is that the Australian housing market is starting to implode a bit as well, so that’s not a good look either. However, the Australian dollar is hardly ever driven by Australia itself, so if we get some type of US/China negotiation good news, this pair could turn back around. All things being equal though, I would not be a buyer until we break above the 0.70 level, essentially making this market “dead money” in general, so I am just currently observing it. However, if we get a daily close outside of the 200 point range that I have marked on the chart, then I could be convinced to start putting money to work in one direction or the other.
Please let us know what you think in the comments below
This article was originally posted on FX Empire
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