Aussie Dollar: A Short Set-up Developing …

By: Black_Swan

Sometimes we like to give you a free glimpse into what types of trade set-ups we watch for and act on in our premium services. Here’s an interesting set-up that’s caught our eye ...

There are a couple things going on that are impacting the price of the Australian dollar versus the US dollar. Among them: interest rates, economic developments and the global risk-taking environment.

The US Federal Reserve’s Australian counterpart, the Reserve Bank of Australia, has maintained fairly solid footing on interest rates amidst a growing backdrop of economic questions and heated inflation. The Federal Reserve has made little to no headway on this front.

This dynamic is largely why the Aussie is fresh off a multi-decade high versus the buck. But there are two things that could shake-up the Aussie relative strength: a softening economy and growing risk aversion.

Granted, Australia’s economy isn’t in imminent danger of faltering to the extent of the US economy, but a downshift may find its way into the exchange rate. Additionally, the Australian dollar could soften up if risk-taking is wiped off the table for a while. Global stock market declines signal this could happen. US stocks, in particular, are entering the territory that could be officially referred to as “long-term bear market.”

With those risks in mind, the technical picture confirms the potential for at least some short-term exchange rate weakness ...

Today’s price bar not only represents a key-day reversal (signaling a short-term trend change), but should it close below Friday’s open it would indicate a bearish engulfing pattern set-up. And considering it comes on a day that the Aussie set a fresh 25-year high, it could mean extended weakness for the Australian dollar.

Jack Crooks

Black Swan Capital LLC

http://www.blackswantrading.com/

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