Aussie continues to find support against Franc

Kate Leaman Kate Leaman

5 March 2019

AUD / USD

During the trading session on Tuesday, we continue to see a lot of support for the Australian dollar, although it has been a bit soft over the course of the last couple of days. At this point, the market looks as if we are finding plenty of buyers underneath, and that we should continue to go around this area looking for more volume to go higher. At this point, the market looks very likely to find plenty of buyers down to at least the 0.70 level underneath.

AUD CHF

A barometer for risk appetite

Keep in mind that this pair as a barometer for risk appetite overall, as the Australian dollar is considered to be a “riskier currency”, as it is so highly tied to the Asian economy. It is especially so these days, as we have the USD/China trading discussions continues to be one of the big factors when it comes to global markets. At this point, it’s very likely that this will move right along with the Chinese situation, and as that is a very fluid situation, it makes a lot of sense that it will be erratic to say the least

However, if you believe that there is a deal in the works, it makes sense that the Australian dollar will continue to get a bit of bullish pressure when it comes to the Aussie as they supply so much of the hard materials for Chinese production. On the other side of the equation, you have the Swiss franc which is a proxy for safety. In other words, if global risk appetite rolls over and show signs of panic, this pair will fall apart.

AUD/USD

Don’t forget that the best way to measure a currency as far as core strength is concerned, the US dollar is where it’s at. Pain attention to how the Australian dollar acts against the US dollar is going to be crucial, because if it rolls over at that market, then it means it will roll over here as well. Ultimately, if we rally in that pair, it will transfer to strengthen over here. For what it’s worth, that pair looks very similar to this one right now, having a major amount of support underneath that seems to be looking to keep the market alive.

Build a position

One of the things that is probably paramount for this pair is to scale in slowly to this market, as we could spend quite a bit of time right here at the 0.7075 handle. By adding slowly on dips, you can build up a larger core position that can take advantage of the range, but by being relatively cautious about getting in, you can take advantage of higher leverage as the market proves itself to be stable.

If we did break down below the 0.70 level on a daily close, then the thesis is busted, and it’s very likely that something negative on a global scale has happened. If that occurs, the Swiss franc will almost undoubtedly pick up a bit of value, and you could even start to look at shorting the AUD/USD pair as well. Otherwise, I suspect that we will eventually go looking towards the 0.72 level yet again.


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