The AUDUSD pair is off the highs as the Australian GDP missed expectations. Moreover, a Doji candlestick, a bearish pattern, formed on the daily chart, signaling a temporary top might be in place.
The Australian dollar is one of the best-performing currencies in this crisis so far. It benefited from two major positive drivers.
On the one hand, the proximity to China did helps. China is one of the few economies supposedly to have economic growth in 2020. Because it imports most of its raw materials from Australia, it supported the Australian economy.
On the other hand, higher commodity prices fueled the Australian dollar rally. As such, the AUDUSD strength was offset by the commodity prices and the RBA did not feel the need to intervene.
Australian GDP Missing Expectations
The first Australian recession in over three decades was confirmed today. The Australian GDP declined by 7% on expectations of a -6% contraction – fueling expectations of a weaker AUDUSD exchange rate to follow.
Moreover, coupled with the strong ISM Manufacturing data for August, the two pieces of economic data pushed the AUDUSD below the 0.74.
AUDUSD Technical Analysis
A Doji candlestick is valued by technical traders for its simplicity. After all, it is just a single candlestick that shows a potential top or bottom. The key to trading it is to have a stop-loss at the highest point, if the Doji is bearish.
Another thing to consider at Doji candlesticks is where the opening and closing prices are in relation to the upper and lower shadows. In this case, this is called a Southern Doji, an even more bearish pattern.
To trade it, consider a move back to the 0.72 level. This is an area where the Aussie pair consolidated before and an area where it might consolidate in the future. If it is to form a head and shoulders, that is the target for the right shoulder.
Hence, consider going short at market with a stop-loss at the highest point in the Doji candlestick and target the 0.72 level.