Forex

Currency Analysis Report 9/11/19 – Risk Off Environment Continues For AUD/USD

A risk off environment is when investors move their funds from safe haven assets to growth type assets.  A risk off environment is with characteristics of certainty and low volatility.  A risk off environment is where every day people could care less about their retirement statements and the work recession or inverted yield curve is not a top Google search word.  

Because the Australian economy is a base metal exporting economy, as China goes, the Aussie dollar goes and closely follows the movement of copper prices.

Recently, China’s factory-gate prices shrank at the sharpest pace in three years in August, falling deeper into deflationary territory and reinforcing the urgency for Beijing to step up economic stimulus as the trade war with the United States intensifies.

Analysts say flagging demand at home and abroad is forcing some Chinese businesses to slash prices to win new orders or cut output to contain costs, chipping away at already-lean profits and further dampening business confidence.

China’s producer price index (PPI) dropped 0.8% from a year earlier in August, widening from a 0.3% decline seen in July and the worst year-on-year contraction since August 2016, National Bureau of Statistics (NBS) data showed on Tuesday.

Source

But the Aussie dollar continues to move higher against the dollar.  This is how I know we are in a “risk off” environment.   Probably the biggest factor with this “risk off” environment has to do with news about discussion between the US and China will resume in the coming weeks.  However, I think the cat and mouse game these two countries are playing will continue into 2020.   And when trade talks break down again, so will the AUD/USD. So I’m looking to short AUD/USD, but where might be a good entry to short, lets go to the charts to find out.

Big Picture

Price is sitting between monthly and weekly supply and demand. Price broke a longer term monthly up trendline back in April of 2018. The 12 day simple moving average (SMA) is point downward with many closing candles below the SMA.

On the daily chart I found a nice confluence level that price seems to like.

Thus, the following price action I would like to see is the reveral “M” pattern, followed by a breach of the 4 hr demand, followed by a pull back, to potentially take it short.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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