The AUD/USD has fallen rather hard during the session on Monday as the 0.64 level has offered too much in the way of resistance. Because of this, the market is inside the previous consolidation area, with an eye on the 0.62 level underneath for significant support. If we were to break down below that level, then it’s likely that we would see a big plunge lower, perhaps down to the 0.60 level given enough time. That obviously will have a lot of psychology attached to it, so at that point I would not be surprised to see the Australian dollar bounce.
In the other hand, if we were to break above the 0.64 level, then it’s possible that we could go to the 0.65 level, which is the top of that previous consolidation region. Beyond that, we also have the 50-Day EMA approaching, so that of course will have a significant amount of influence going forward. At this point in time, market is likely to continue a lot of volatility, and therefore I think we see some type of exhaustion. It will probably offer a nice shorting opportunity, after all the US dollar is by far the strongest currency in the world and of course we continue to see the Federal Reserve tight monetary policy. With that in mind, it makes perfect sense that this pair would continue to fall.
- You should also keep in mind that the market has sold off drastically enough that a relief rally could be needed.
- That relief rally will only offer shorting opportunities to pick up “cheap US dollars.”
- I think the 50-Day EMA is going to act like a trendline, so even if we do get some type of pop higher, I’ll be looking at it as an opportunity. In fact, I have no interest in buying this market until we break out above the 0.67 level, something that would take a Herculean effort.
The 0.67 level was an area that was previous support going back years, so breaking through that area of course does mean quite a bit of negativity, and a big shift in the perception of the Aussie dollar by the market. A little bit of patience goes a long way, and as a result I like fading rallies instead of trying to force the issue at low levels.
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