With the recent spike across the board for the Aussie, it was only right to make an update on the current status of the Australian Dollar. Before we look into the liquidity seen today, let’s break down the AUD/USD charts from top down.
Looking at the quarterly chart, we can immediately spot a level of support dating back to 1998. The trend line break and retest has also seen price reach the target point of 0.60000. These are the lows of 2008 when we saw the financial crisis. If we look closely, the body of the quarterly candle closed just above the 2008 lows.
Looking at the monthly, we can now see the closure above the 2008 lows as well as the monthly closed back above this price point. Taking into account, the candle formation is still bearish, so this may not be the low of 2020.
On the weekly, things are getting clearer as we can now see the prior weekly candle is bullish, engulfing the weekly candle previously. As you can see, we have the 2008 recession lows plotted on the chart and this may serve as support for current market price.
With the recent purchasing of bonds and interest rates being cut by the RBA ( Reserve Bank of Australia ), there is an attempt to prop up price and increase the value of the Australian dollar. Over the last 3 weeks, $320 billion has been pumped into the economy to stimulate growth.
The spike may not appear as insane on AUDUSD as it may seem on GBPAUD. In under 5 minutes, the pair fell nearly 400 pips. This came as a result of the Prime Minister of Australia increasing the stimulus package with an announcement of another whopping $130 billion.
Another major factor to take into account is that China is looking to recover and bounce back from coronavirus. What does that have to do with Australia ? Well, Australia and China are in fact the largest two way trading partners, so should China recover, we may see the Aussie bounce back, coming to test the 0.70000 handle in the coming months or year end.
Jumping onto the 4 hour timeframe and we have an interesting setup to say the least. Price has begun creating higher highs and higher lows. Now that price is above the recession lows, we have a plotted fibonacci tool. The interesting part to note is that the recession lows line up with the 61.8 fibonacci region for a potential reversal. We also have support zone hi-lighted below this region. Upon confirmation of a reversal, this may push price back into the 0.70000 handle seeing another recovery from these lows.
As always , be patient and await the highest probability trade and execute with suitable risk management. For more articles like these, subscribe to our blog and stay up to date with the markets.