AUD/USD Price Forecast – Aussie gaps lower
The Australian dollar gapped lower to kick off the week as the Chinese set over the weekend they are pulling their trade representatives out of the bilateral talks. This exposes one of Australia’s biggest weaknesses, the fact that it is so highly levered to the Chinese economy. It is a major supplier of raw materials, and that will continue to be the case going forward. If there is a lack of demand for Chinese goods, by extension that will put a dent in the Australian economy. Adding a bit of a gut punch to this move is the fact that Gold has been selling off as well, which quite often the Australian dollar is used as a proxy for.
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We will have to see how the treasury markets behave in the United States, but if demand starts picking up, it’s likely that the US dollar will also strengthen simultaneously. That being said, I’m not looking for a meltdown but I do recognize that a pullback makes a lot of sense until we get some type of good news out of the trade war. I think that perhaps the Australian dollar got a little ahead of itself, just as investor expectations did between the Americans and the Chinese. This trade wars going to be longer than most people thought, and therefore a certain amount of readjustment of expectation and position size would be expected. I believe that we will probably go looking towards the 0.72 level, followed by the 0.7150 level. Obviously though, some type of good news from the US/China trade situation could change everything immediately.