The Australian dollar has fallen a bit during the course of the trading session on Thursday as the 0.73 level has finally been pierced. Because of this, I think that we do continue the downtrend overall, allowing for a continuation of the ugliness that we had seen recently. The 0.73 level has been stubborn with that support multiple times, and of course I had mentioned previously that the area between 0.73 and 0.74 had been significant support, so this is an area where you would anticipate a lot of noisy trading.
The Australian dollar is being affected by the Chinese economy sinking, with economic numbers come out less than impressive. Furthermore, there are a lot of credit concerns in China, right along with credit impulse numbers failing, which typically means that we are looking at a potential situation in China that would be bad for global growth. Remember that Australia sends almost all of its hard commodities to the mainland in China, so this all ties together.
The US dollar also got a major boost during the trading session as retail sales came in much stronger than anticipated. In fact, most of the baseline analysis was for retail sales to contract, but they ended up gaining well over 1%. That suggests that the United States economy is going to continue to outperform many of the other ones, and with Australia seemingly hell-bent on destroying its own economy through lockdowns and strict measures, it makes quite a bit of sense that people would prefer to put their money in America while this situation persists.
To the downside, I believe that the 0.71 level will eventually be your target, perhaps even the 0.70 level. This is a market that has been very choppy and noisy, but that has been true with both currency pairs as people are still trying to figure out what various central banks around the world are going to do. In this case, Australia has its hands tied to the fate of China more than usual, mainly due to the fact that unless China picks it up, Australia will not be able to do much for itself. Regardless, the 50 day EMA above has offered significant resistance over the last couple of weeks, and it is now starting to turn lower, yet another reason to think we are dropping.
