Aussie Contradictions Resolved
Daryl Guppy | Sep 18, 2018 12:24
Originally published by guppytraders.com
A few weeks ago we noted the market contradiction between the Australian dollar and the Australian market.. The Australian market was making new 10-year highs but the Australian dollar was making significant lows.
Here was the contradiction– a falling AUD and Australian market making new 10-year highs.
Who is the dominant partner in this relationship? The answer is now in. It’s the Australian dollar. The collapse of the AUD pointed the way for the substantial retreat in the Australian market. As much as Australians like to think that Trump's trade wars have no impact on Australia, the reality is very different. Australia, a close ally of the US, is just so much collateral damage.
The Australian market is not immune from self-inflicted wounds. The criminality in the banking and insurance sectors being revealed by the Hayne Royal Commission is undermining the companies that make up the bulk of the Australian market index.
Traders who were alert for evidence of a pullback in the Australian market went short as the Aussie dollar failed to hold support near $0.74. The AUD is a lead indicator for the Australian market.
The Australian dollar broke the long term uptrend in April and quickly developed a substantial downtrend. It reached 12 month lows at $0.74 and rapidly reached two year lows near $0.715.
A fall below $0.74 has a downside target near $0.715. This target is established using the support area tested in 2016 and 2017. The consolidation near $0.715 is weak. The short term Guppy Multiple Moving Average is well separated suggesting that traders are committed sellers. There is a low probability of a rally rebound towards $0.74. Traders fade the rally for a move towards the next support level near $0.69.
There is a weak relationship between Australian dollar weakness and US dollar strength. The impact on the Australian dollar flows from revelations about a corrupted financial sector and the fallout from Trumps ramping up for tariffs. What hurts China hurts Australia and that’s before tariffs are directed specifically at Australia.
We use the ANTSYSS trade method to extract good returns from the potentially fast fall as the retreat develops.
Axicorp . Guppy appears regularly on CNBC Asia and is known as "The Chart Man". Disclaimer: Daryl Guppy is not a financial advisor. These notes are for educational purposes only and provide an example of applied technical analysis.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.