Cha-ching!! The global panic helped us reach our bearish target on the AUD/USD pair as Mr. Aussie managed to become one of the major losers during “Black Monday” market crash thanks to China. Ms. USA was also among the losers as her power shifted from strong to weak as I covered in this week’s currency strength ranking. However Mr. Aussie became weak enough to drag Ms. USA all the way down to our target of 1.7150 [Celebration please!]
Is there more opportunity for us to trade? Hell yes! Here is how:
Economic Points
Aussie side
Reserve Bank of Australia (RBA) governor Glenn Stevens said on Tuesday the focus of reform debate in Australia should be on economic growth, rather than debates on the timeline for returning the budget to surplus. He said desirable economic growth could not be delivered by only interest rate cuts or short-term fiscal initiatives.
We understand his frustration because China is obviously dumping its problem on the Land Down Under while the country has been trying to get back on its feet, with wage growth is picking up and consumer spending remains surprisingly robust.
Now that the RBA is no longer calling for further Aussie depreciation, it is the developments in China and commodity prices that have shifted the sentiment in the market, and it ain’t look upward.
US side
Despite the market crash this week, the US has been printing positive economic data with Consumer Confidence up at 101.5 better than the expected 92.8 figure and higher than July’s reading of 91. Durable Goods Orders also came in green on Wednesday helping Ms. USA to get back on her feet after the clash.
With no interest rate hike in the horizon in September and possibly not even in December, all we can rely on is the positive economic data.
Summary
Even if Ms. USA doesn’t get as strong as she was before Black Monday, Mr. Aussie seems to have more down moves to show off on the forex dance floor and can drag the pair down single handedly at least a bit more.
Technical Points
The AUD/USD pair broke below the key support level of 0.7150 forming a new bearish sentiment. While the market remains in risk-off mode, the break out may have open doors to further drops with within the falling channel targeting 0.7050 and 0.6960 in extension. We don’t want to go crazy with our targets anymore because any day now the AUD/USD could shift sentiment again, therefore conducting our short-term analysis on the 4-hour chart. For now the pair remains below the Ichimoku cloud. On the 4 hour chart we could see a correction up to the 23% Fibonacci level at 0.7150 before the pair continues down.
Long Term
Taking a look at the monthly chart gives us more backup to the bearish strategy since the pair seems to have yet to complete a Saucer Top pattern, remains below the Ichimoku cloud in an overall downtrend, with support levels set at 0.6960 and 0.64.
Trading idea
Bearish below 0.7150 targeting 0.7050 and 0.6960 in extension
Short term supports and resistance levels:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7050 | 0.7150 | 0.7230 |
| 0.6960 | 0.72 | 0.7270 |
*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
