The Australian dollar continues to be very noisy as we have seen a lot of risk on/risk off type of behavior around the world. The Chinese credit issues are the latest headlines have people paying close attention to, and as a result is not a huge surprise to see that there would be a lot of selling of the Aussie dollar as it is so highly levered to the Chinese economy. After all, Australia has a huge export situation when it comes to China, with hard commodities such as iron, gold, and the like. With this being the case, the market is likely to see a major correlation to what happens on the Chinese mainland and this currency pair.
AUD/USD Video 21.09.21
Furthermore, the US dollar is considered to be a “safety currency”, so it does make a certain amount of sense that we would see the market’s favorite when there are times of uncertainty. To the downside, if we were to break down below the bottom of the candlestick, that probably opens up a bigger move towards the 0.71 level. To the upside, if we turn around and take out the inverted hammer from the Friday session, then we can start to think about the 50 day EMA.
Regardless, this is going to be a very noisy and messy situation, so I think you need to be cautious about your position size, at least not until we get a bit of clarity going forward. Because of this, we need to be very cautious about how much money you put to work right away, but ultimately this is a market that I do think probably will make an impulsive move sooner or later, that we can start following.
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This article was originally posted on FX Empire