For the last several days, the Australian dollar has been steadily dropping in price, especially in regards to the world’s most heavily traded currency: the U.S. dollar. This is partly due to the fact that the U.S. currency is getting stronger faster than Australia’s currency, but it is also happening because China’s economy is slowing down, too. This might not make sense at first. The Chinese yuan has recently weakened, which might indicate that Australia’s dollar should get stronger in comparison, but China is one of the biggest buyers of Australian goods and services, and this means that less money is being pumped into the Australian economy.
As you can see, there is some pressure within the Forex marketplace upon this vulnerable currency. The Aussie dollar looks like it will continue to face this pressure for quite a while still, but just how far can the currency fall before a reversal becomes inevitable? The Australian employment report is due out soon, and this will have a big impact on where future prices will go. It’s expected that about 10,000 jobs have been lost, and that the overall unemployment rate will be right around a 40 month high. Obviously this is not a good thing for the Aussie dollar, and this is a strong indicator that prices will keep dropping for the time being.
Still, this is not going to be a long term drop. The Aussie is already pretty low in comparison to the world’s major currencies, and while the short term forecast is that the Aussie will drop, the long term focus says that things are looking pretty neutral right now. Longer term Forex traders might want to stay away from this currency.
However, things look pretty promising for the spot trader that trades larger sized lots, and attempts to make the most out of short term fluctuations. If you rely on leverage to maximize your profits, this can prove to be even more lucrative.
Be careful here, though. There are many technical indicators that show that selling the AUS/USD pair long might not be a great idea at this point. Prices are hovering around the support line at 0.9542, and the Fibonacci retracement level at 23.6 percent indicates that a reversal could happen pretty soon as prices appear to have stalled out in this general vicinity. Even short term traders need to be aware of this fact in order to avoid a potential loss. The best course of action for many traders might even be to avoid trading this pair for the time being until a clear cut course of action begins to emerge. Fundamental aspects of the Aussie dollar are saying one thing, but as you can see, there are also technical indicators saying the exact opposite. Whenever something like this occurs, you will want to exercise extreme caution.
Observing all changes in the AUS/USD is necessary if you want to position yourself for a trade down the road. When you have mixed signals, this is often an indication that prices are consolidating, but when they do begin to move again, if you are prepared, a lot of money can be made by the astute trader, especially if they have been preparing and can get a jump on the rest of the money being pumped into the Forex marketplace. The Australian dollar might not look promising right now, but this can easily change at any time given the future reports coming out and trader pressure that will be continuing to mount.