01-03-2019, 02:16 PM
AUDUSD Falls To Its Lowest Level in 9 Years!
AUDUSD is a good pair that most of the time behaves very well. But sometimes it can show erratic behavior. Currencies in recent years have shown tendency of falling sharply suddenly and then recovering in a few minutes. This is precisely what happened today with AUDUSD. It fell to the low of 0.67190 and then recovered in the next 10-15 minutes to 0.69351. Take a look at the following AUDUSD H4 screenshot:
![[Image: AUDUSD+H411.png]](https://www.doubledoji.com/go/AUDUSD+H411.png)
Now can you see the most recent H4 candle showing a very long tail? This tail was formed on breaking news that made the financial media nervous. The catalyst this time has been the Apple. Apple sales have been impacted heavily by the slowdown in the Chinese domestic economy where Apple iPhones were selling well. This news first caused havoc in the stock market and then it was the turn of the currency markets. Whatever, as currency traders we just have the charts. We look at the charts and from those charts we make our buy and sell decisions. Take a look at the AUDUSD H1 chart below:
![[Image: AUDUSD+H111.png]](https://www.doubledoji.com/go/AUDUSD+H111.png)
Now in the above AUDUSD H1 chart, you can see the big lower shadow in the AUDUSD H1 candle that is followed by the bullish candle. These flash crashes are becoming frequent in the currency market. This sudden drop happened when the market is having low liquidity as it is the start of the new year and most traders are still on holidays and it will take the market few more days to recover its full volume and liquidity. Below is the AUDUSD M30 chart:
![[Image: AUDUSD+M3011.png]](https://www.doubledoji.com/go/AUDUSD+M3011.png)
Now the problem with these flash crashes is that when they happen, most of the time the traders get caught on the wrong side of the market and get their accounts blown. Most of these flash crashes are being blamed on rogue algorithms that trade news. When they see news like bad Apple sales and bad EU performance, they open huge sell orders that can wrack havoc with the currency market during times of low volume and low volatility. Below is AUDUSD M5 chart:
![[Image: AUDUSD+M511.png]](https://www.doubledoji.com/go/AUDUSD+M511.png)
Now in the above AUDUSD M5 chart, you can see two very big AUDUSD M5 candles. First M5 candle is bearish and AUDUSD falls heavily like a stone. But then in the next 5 minute candle we see AUDUSD recovering rapidly and AUDUSD price rising. Fortunately we didn't trade AUDUSD. There must be many trader who would have been burned by this sudden price drop and then price rise.
As you can see, it is always a good idea to take at the different timeframes. The change in the market regime first appears on the lower timeframe then propagates to the higher timeframes. When you are trading a currency pair you are trading two currencies in fact. In case of AUDUSD, we are trading Aussie Dollar against the US Dollar. We need to keep an eye on what is happening on the two economies the Aussie economy and the US economy. Sometimes the move starts in the Aussie economy and most of time, the move will start in the US economy. You need to understand both the economies.
AUDUSD is a good pair that most of the time behaves very well. But sometimes it can show erratic behavior. Currencies in recent years have shown tendency of falling sharply suddenly and then recovering in a few minutes. This is precisely what happened today with AUDUSD. It fell to the low of 0.67190 and then recovered in the next 10-15 minutes to 0.69351. Take a look at the following AUDUSD H4 screenshot:
Now can you see the most recent H4 candle showing a very long tail? This tail was formed on breaking news that made the financial media nervous. The catalyst this time has been the Apple. Apple sales have been impacted heavily by the slowdown in the Chinese domestic economy where Apple iPhones were selling well. This news first caused havoc in the stock market and then it was the turn of the currency markets. Whatever, as currency traders we just have the charts. We look at the charts and from those charts we make our buy and sell decisions. Take a look at the AUDUSD H1 chart below:
Now in the above AUDUSD H1 chart, you can see the big lower shadow in the AUDUSD H1 candle that is followed by the bullish candle. These flash crashes are becoming frequent in the currency market. This sudden drop happened when the market is having low liquidity as it is the start of the new year and most traders are still on holidays and it will take the market few more days to recover its full volume and liquidity. Below is the AUDUSD M30 chart:
Now the problem with these flash crashes is that when they happen, most of the time the traders get caught on the wrong side of the market and get their accounts blown. Most of these flash crashes are being blamed on rogue algorithms that trade news. When they see news like bad Apple sales and bad EU performance, they open huge sell orders that can wrack havoc with the currency market during times of low volume and low volatility. Below is AUDUSD M5 chart:
Now in the above AUDUSD M5 chart, you can see two very big AUDUSD M5 candles. First M5 candle is bearish and AUDUSD falls heavily like a stone. But then in the next 5 minute candle we see AUDUSD recovering rapidly and AUDUSD price rising. Fortunately we didn't trade AUDUSD. There must be many trader who would have been burned by this sudden price drop and then price rise.
As you can see, it is always a good idea to take at the different timeframes. The change in the market regime first appears on the lower timeframe then propagates to the higher timeframes. When you are trading a currency pair you are trading two currencies in fact. In case of AUDUSD, we are trading Aussie Dollar against the US Dollar. We need to keep an eye on what is happening on the two economies the Aussie economy and the US economy. Sometimes the move starts in the Aussie economy and most of time, the move will start in the US economy. You need to understand both the economies.