- The AUD/USD experienced a decline during Friday's trading session, extending the sell-off that commenced on Thursday.
- Upon examining the Wednesday candlestick, it becomes evident that the market formed a shooting star pattern at the top of the consolidation area.
- This pattern suggests the likelihood of continued downward pressure until the market reaches the bottom of the range, which is closer to the 0.66 level.
- This decline aligns well with global concerns about economic growth, as the Australian dollar is closely tied to commodities, which, in turn, are linked to growth prospects.
Furthermore, the US dollar is bolstered by a hawkish central bank stance. While the Australians recently surprised the market with a rate hike, there remain apprehensions not only about Australia but also about China. It is important to remember that the Chinese economy significantly influences the trajectory of the Australian dollar, establishing a comprehensive connection between these two economies. If central banks worldwide maintain tight monetary policies, it dampens risk appetite, ultimately impacting the Australian dollar negatively.
A daily close below the 0.66 level would open the door for further selling, with a "measured move" potentially leading the market down another 200 points to the 0.64 level. Conversely, if the market reverses and surpasses the shooting star's high on Wednesday, it would indicate a potential move of 200 points to the upside, targeting the 0.68 level. Until either of these scenarios materializes, the market is expected to continue trading within a range-bound manner, reflecting the back-and-forth movements witnessed over the past few months. However, once a breakout occurs, it will likely present a clear signal, enticing numerous traders to participate in what is commonly referred to as the "fear of missing out" (FOMO) trade.
The AUD Faces Downward Pressure
In the meantime, it is advisable to approach this market as a range-bound environment, utilizing appropriate range-bound trading strategies. It is also crucial to exercise prudence in position sizing, as once the market breaks out of the range, the subsequent move is expected to be explosive.
At the end of the day, the Australian dollar faces downward pressure, reflecting global growth concerns. The shooting star formation on the Wednesday candlestick suggests the continuation of the current sell-off, potentially leading the market toward the 0.66 level. The relationship between the Australian dollar and commodities, as well as concerns about Australia and China, contribute to the currency's vulnerability. Traders should monitor key levels such as 0.66 and await a breakout, which will provide a clear signal for potential trading opportunities. In the meantime, employing range-bound trading strategies and practicing prudent position sizing is advisable.
Ready to trade our Forex daily analysis and predictions? Check out the best forex trading platform Australia worth using.