This week AUDUSD has broken below a key level.
The breakout is considered to be confirmed and I expect continuation next week.
Target levels are all in 20 pip range :
1. AUD is broadly positively correlated with the DJI (of course, it varies at times).
2. The USD strength is broadly inversely correlated with the DJI.
3. DJI has a strange dynamic relationship with currencies that is difficult to fathom.
4. The USD dominates because it is so hefty and violently volatile.
When USD strength is positively correlated with the DJI (at times) it applies bearish pressure. The opposite is broadly true too.
Both the FED and POTUS want a weaker USD - this is pretty much settled.
For trade purposes some countries want a weaker USD. This is because they'd pay less for stuff if their own local currencies remain strong.
For countries holding US Treasuries (bonds), they're not happy with a weaker USD. Why? Because bonds are agreed in USD. So if China has $1.1 Trillion in US debt (money owed to China, as per Treasuries), getting paid back in weaker USD is not nice.
This means that some countries are in a love-hate relationship with the USD.
AUD is likely to be in a mess shortly because the Australian Central Bank is about to follow the FED and start their own QE programme.
Loads of countries are heading for QE. This means that in a global financial crisis which is emerging, there is a 'race to the bottom' to see who can devalue their currencies faster and harder. Sounds ridiculous but this is what I've discovered. If anyone has different ideas, do share.