After a dramatic week for the Aussie, where next for the risk currency?

After a dramatic week for the Aussie, where next for the risk currency?

The Australian dollar has had an extraordinary week rampaging higher across the currency complex. So where next for this risk currency?

00:19

Introduction to Liz Ann Sonders and her charts

00:19

The speaker introduces Liz Ann Sonders, a well-regarded analyst formerly with Charles Schwab, known for sharing unique and insightful charts and data on Twitter. They emphasize her value as a source of detailed market analysis before moving on to discuss specific charts.

00:49

Unemployment impact on industries like hospitality and retail

00:49

The discussion highlights the significant unemployment problem affecting multiple industries, particularly hospitality and retail. These sectors rely heavily on labor-intensive jobs that are generally low-paid, which has broad societal and market implications. The focus is on how these industries, especially accommodation and food services, are impacted by the current economic challenges.

01:59

Shift to online shopping and market changes

01:59

The speaker discusses the current state of various industries such as airlines, cruise liners, and retail, highlighting significant shifts especially in retail due to the rise of online shopping. They note the practical benefits of online shopping, contrasting it with countries like Italy where in-person shopping remains the norm. The market is undergoing major changes that will become evident over the coming months and years, potentially leading to the disappearance of some industries and the emergence of new ones. This period is described as a significant inflection point beyond just the immediate future.

03:10

Aussie dollar as a proxy for risk sentiment

03:10

The speaker discusses the value of following a particular Twitter account that shares insightful and easy-to-understand data. They then focus on the Australian dollar, especially the AUD/JPY pair, as effective indicators of market risk sentiment. The discussion highlights the concept of ‘risk on’ versus ‘risk off’ in trading, where market participants either pursue higher risk for greater reward or retreat from risky assets due to geopolitical or fundamental concerns. Traders are encouraged to assess their own risk tolerance. Additionally, the Forex program emphasizes the importance of staying informed about other markets to make better trading decisions.

04:21

Using related markets for forex analysis

04:21

The module on relational analysis examines other markets to gauge overall sentiment, which directly influences the buying and selling of certain currencies. The approach can also work in reverse: for example, when trading indices, one can look at the forex market to gain insights.

04:51

Aussie yen chart and key indicators overview

04:51

The speaker discusses a strong correlation between certain Australian currency pairs and stock indices, using the Australian yen as an example on a 10-minute chart. They describe the chart’s components, including candlesticks, a volatility indicator, volume, and the Camarillo indicator, which provides key daily levels. The 10-minute chart updates on a 24-hour basis, with new levels generated after the market rollover at 10 PM. They also mention a limitation of the NinjaTrader platform, where the hourly chart does not retain daily settings and defaults to a five-day view.

05:56

Strong price action breaking key levels

05:56

The discussion focuses on the Australian dollar (Aussie) currency pairs, highlighting their strong upward momentum following a significant event earlier in the week. The speaker explains that typical price levels, calculated weekly, were surpassed due to unusually large price movements and volatility. They had to adjust their analysis to the monthly chart to better capture these extremes, noting the price reaching an R6 level, which represents the furthest expected point. This surge is attributed to impactful fundamental news from China, a major influence on the Aussie dollar, with volume data underscoring the intensity of the market reaction.

07:35

Volume anomalies and price action comparison with indices

07:35

The speaker discusses unusual market behavior observed under a specific sized candle, indicating subtle but important signals. They analyze the daily and ten-minute charts around the US market open, noting a rush up followed by a shooting star candle piercing a key resistance level (R4). Despite breaking this level, the price did not hold and pulled back. Simultaneously, the YM index showed a similar price surge hitting the daily R2 resistance with significant volume followed by a volume decline and a hanging man candle pattern, suggesting a potential reversal and subsequent price congestion.

08:35

The discussion shifts to the Australian Yen, which shows very similar price action to the earlier examples. Although exact correlation figures are not provided, it is noted that the Aussie dollar and the S&P tend to behave similarly. The speaker highlights the strength of yen pairs like the Aussie yen and New Zealand yen, emphasizing their recent strong upward movement. They stress the importance of recognizing when extreme price action breaks levels, necessitating analysis at higher time frames to identify significant market levels. The segment ends with a transition to reviewing the Euro Aussie.

By Anna Coulling – creator of volume price analysis