When something can't rally on good news, there's only one other way it'll go
That pretty much sums up the aussie in 2018 trading so far. As mentioned two days back, no matter what happens in markets the aussie just can't seem to get off the floor. With equities and trade tensions weighing on markets today, it just adds for more reason - among other things highlighted last week - for the aussie to fall even more.
Right now, AUD/USD moves back towards the lows seen in mid-August and the sellers look poised to test support and bids at the 0.7200 handle again. The year's low so far was at 0.7203 just shy of the figure handle - where barrier options are reportedly sitting as well.
Fading any rallies in AUD/USD has been one of the more profitable trades this year and with the RBA being thrown into further limbo with regards to rate hikes earlier this week, the case for continuing with the strategy only grows stronger as the Fed looks to hike in September and possibly December.
As mentioned several times, the real risk to the trade here will not lie in the aussie side of things. It's well established by now that the aussie is definitely struggling on all fronts - geopolitics, yield spreads, central bank divergence, flagging inflation, weak wages, poor household consumption. Hence, the risk to the trade comes from any capitulation in the dollar.
But if you respect technical levels well enough and define and limit your risk, then the trade here remains very much a straightforward one.
For now, there is support from the swing region around 0.7220-25 before the 0.7200 will be tested. But given the momentum seen this week, it certainly looks like it's a matter of time before the figure level is tested.
