The Australian dollar has rallied rather significantly during the week, reaching towards the 0.70 level before stopping hard on Friday. This makes sense, because we are trying to get to the G 20 where the Americans and the Chinese are going to start talking. That of course is a scenario that could really kick off a lot of fireworks around the world. After all, everybody is essentially paying attention to the trade war, and then trade war of course has a major influence on the Australian dollar as Australia is such a major producer of hard commodities for the Chinese economy.
AUD/USD Video 01.07.19
If we can break above the 0.7060 level, then it’s likely that the market will continue to go much higher. At that point, we would be looking at the 0.7250 level. Ultimately, that could be helped by the Federal Reserve as well, as they are looking to cut interest rates. That generally is good for risk appetite based markets such as the Australian dollar, so there is a little bit of a lift underneath. However, if the trade negotiation takes a turn for the worse, that will punish the Aussie due to its high correlation to the Chinese economy. Ultimately, this is a market that will continue to be choppy and difficult but Monday could be interesting at the open. If we gap higher, and above the 0.7060 level, then we may have just put in the bottom. However, if we break down and gap lower, I would anticipate a return to the bottom of the recent consolidation zone.
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This article was originally posted on FX Empire