There’s a saying around the world that Australian traders know all too well…

If the US sneezes, the world catches a cold.

That is without a doubt the story of the day down under. When US President Trump continued to taunt North Korea and threaten action, ‘like they never thought possible’, then Australian markets were always going to have a hard time of it today. Australia is a huge alley of the US, so whenever there’s any geopolitical tension in the world, the ASX also feels the strain.

However what we often see during the Asian session is that if there’s a large move overnight, we can sometimes get a little bit of a retrace. That’s because all of the negative news is already factored into the market and in many cases it's slightly over-done.

For Australian equity markets, that seems to be the case. They’re retracing throughout the session, after they opened down more than 1%.

The Aussie Dollar has Broken Support

The AUD/USD on the other hand, is the one to watch for traders. It’s continuing to get crushed and has just recently taken out support at 0.78600 and is now testing 0.78400.

As it stands we’re getting a good risk/reward on a potential move to 0.78000, however we’ll first need to break 0.78400. Ideally 0.78600 will now act as resistance, however there is always the potential for a retrace to the trendline that is quite well established.

Longer Term

I’ve been bearish on the AUD/USD all the way down from 80 cents and I think we are just getting warmed up. Longer term I think we are likely to get to 0.75000 and below. This is at the very least the way sentiment is headed.

The best strategy for today is to ride the momentum down during the Asian session. The Aussie continues to take out support levels, so the next key levels to watch is firstly 0.78400, then the all important 0.78000.