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The Australian dollar initially did try to rally during the trading session on Friday but then fell rather hard. To kick off the week on Monday, looks very much the same so I believe at this point in time we have a situation where we are going to be watching the 0.5625 level, an area that has been important multiple times, but I would also point out it's not major support.
Underneath there, we have the 0.56 level, followed by the 0.5575 level, both of which could cause a little bit of a bounce but there's not a lot going on in this chart that suggests strength. I think you continue to see the Australian dollar behave the same way it has against the US dollar, simply offering selling opportunities every time it bounces. In fact, I don't think that a move to the upside shows any signs of strength until we get to the 0.57 level. If we can break above there and close on a daily candle above that level, then I might start to think in the other direction.
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Keep in mind that the Australian economy is highly linked to the Chinese economy, and at this point in time that is not a particularly good thing. Bond yields in China continue to crash, suggesting that investors believe that the economy is about to hit a major slowdown, and at this point in time there's only so much the Chinese can do with that. After all, even though it's a control economy, the reality is that foreign investors are lukewarm to China at the moment, and it is showing up everywhere.
EURUSD Chart by TradingView
The Australian dollar is highly sensitive to the Chinese economy mainly due to the fact that so many of Australia's exports end up in mainland China. Historically speaking, the Australian dollar has always been a bit of a proxy for China, and I don't see how that changes anytime soon. While the Swiss have a plethora of problems of their own, the one thing that Swiss franc holders take solace in is that it is considered to be a safety currency. I think you continue to see short-term rallies faded.
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