A few weeks ago I prominent the market contradiction between the Australian dollar and the Australian market.The assets weigh up market was making new 10-year highs but the currency was posting significant muffles.
There was a contradiction, and a question arose: Who is the dominant partner in this relationship?
Properly the answer is now in, and it’s the Australian dollar.
The collapse of the AUD pointed the way for the substantial retreat in the Australian supermarket. As much as Australians like to think that U.S. President Donald Trump’s career battles have no impact on their country, the reality is very unalike. Australia, a close ally of the U.S., is just so much collateral damage.
The Australian deal in is not immune from self-inflicted wounds, too. The misconduct in the banking and insurance sectors being displayed by the Hayne Royal Commission is undermining the companies that make up the size of the Australian market index.
Traders who were alert for evidence of a pullback in the Australian vend went short as the Aussie dollar failed to hold support close by $0.74. The AUD is a lead indicator for the Australian market.
The Australian dollar indigent the long-term uptrend in April and quickly developed a substantial downtrend. It reached 12-month hushes at $0.74 and rapidly reached two-year lows near $0.715.
A fall lower than beneath $0.74 has a downside target near $0.715. That target is ordained using the support area tested in 2016 and 2017. The consolidation mean $0.715 is weak. The short-term GMMA is well separated, suggesting that retailers are committed sellers.
There is a low probability of a rally rebound toward $0.74. Saleswomen fade the rally for a move toward the next support level intimate $0.69.
There is a weak relationship between Australian dollar weakness and U.S. dollar robustness. Rather, the impact on the Australian dollar flows from revelations on every side the country’s financial sector and the fallout from Trump’s ramping up for taxes. What hurts China hurts Australia and that’s before duties are directed specifically at Australia.
Daryl Guppy is a trader and author of Swing Trading, The 36 Strategies of the Chinese for Financial Traders, which can be start at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at sell conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.
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