Why the Australian Dollar is Falling: Global Growth Concerns and the Commodity Connection

The Australian dollar fell during the course of the day on Friday, extending the selling that started on Thursday. When looking at the Wednesday candlestick, the market has formed a shooting star at the top of the consolidation area. This pattern indicates that the bearish pressure may continue until the market reaches the bottom of the range, which is closer to the 0.66 level. This drop aligns well with global concerns about economic growth, as the Australian dollar is closely linked to commodities, which in turn is linked to growth prospects.

Furthermore it, The US dollar is supported by the central bank’s hawkish stance. While the Australians surprised the market recently with their interest rate hike, there are still concerns not only about Australia, but about China as well. It is important to remember that the Chinese economy greatly influences the path of the Australian dollar. Which leads to a comprehensive relationship between these two economies. If central banks around the world maintain tight monetary policies, they will reduce risk appetite, which ultimately affects the Australian dollar negatively.

A daily close below 0.66 would trigger further selling, with the potential for a “measured move” to send the market another 200 pips back to 0.64. On the other hand, if the market reverses and crosses the top of the shooting star from Wednesday, this indicates a possible move of 200 pips to the upside, targeting 0.68. Until any of these scenarios materialize, the market is expected to continue trading within a range, reflecting the back and forth movements seen in the past few months. However, once the breakout occurs, it is likely to provide a clear signal that prompts many traders to engage in what is commonly referred to as “fear of missing out” or “FOMO” trading.

In the meantime, it is advised to treat this market as a range-bound environment, using appropriate range-bound trading strategies. It is also important to exercise wisdom in position sizing. Once the market breaks out of the range, the subsequent move is expected to be strong.

in the end, The Australian dollar is facing downward pressure, reflecting global growth concerns. The shooting star formation on Wednesday indicates the continuation of the current selling, which could lead the market towards level of 0.66. The relationship between the Australian dollar and commodities, as well as concerns about Australia and China, Contribute to currency weakness. Traders should watch for key levels like 0.66 and wait for the breakout which will provide a clear indication of potential trading opportunities. In the meantime, it is advised to use range trading strategies and to practice judicious position sizing.