The news from Down Under yesterday,
that the price of Iron Ore had taken a respite, on the back of seasonal
restocking by Chinese steel mills (no doubt delighted at the opportunity to do
so at such prices), from the sustained fall it had been experiencing in recent times
and risen by as much as 4% on the day, did nothing to halt the slide in the
AUDUSD pair.
Once again, it appears that at least
one driver of this fall is China. In the past, whenever Chinese growth has
faltered, the Chinese government has stepped in with stimulus measures, mainly
centred on infrastructural development. Now, the regime of which Mr. Xi is the
head has given strong signals that this will not be the case this time round.
Cue the movement of institutional
investors out of the Aussie dollar. Strategists are also, no doubt, eying the
upcoming termination of QE in the USA and considering that now might be a good
time to consider dismantling the Carry Trade in the Australian unit.
Bearish
engulfing candle has appeared on the AUDUSD weekly chart
Last week’s precipitate fall has
resulted in the formation of a bearish weekly engulfing candle on the AUDUSD
chart (see above). From the Technical Analysis (TA) viewpoint, this will be seen by
practitioners as a sign that the selling is expected to continue.
In the past, such a formation, when
it appeared either singly or as part of a combination of weekly candles at what
might be the top of a swing, has resulted in a continuation of the selling
activity. Also yesterday, price dipped below the psychological 0.90c level. It subsequently
moved back over this important round number support but, as of the time of
writing, is now heading down towards it again. It looks like there could be a
battle between the bulls and the bears at this price point. Gird your loins.
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