The Australian dollar has rallied again during the trading session on Monday to kick off the week on the right foot. That being said, the 0.75 level is a significant barrier from a psychological standpoint and it is likely to attract a lot of attention. If we were to break above the recent highs and perhaps even the 0.76 level, that could send this market much higher.
For some time now, the Australian dollar has rallied quite nicely, and it does appear that we are trying to build up momentum. The Aussie breaking out to the upside does make a certain amount of sense, as the Australian dollar is so highly levered to commodities in general, and due to the fact that we continue to see plenty of inflationary pressure out there, which of course works against the value of fiat currency and has people buying hard assets.
While the Chinese economy has been a bit of a mess as of late and of course there are more concerns now of the possibility of coronavirus spreading again, the reality is that there is still a lot of focus being paid attention to the reopening trade, and therefore the massive need for hard assets such as iron, copper, and other metals. This plays right into the hands of the Australian dollar, so I think you continue to look at this through that prism. The 200 day EMA is currently sitting at the 0.7425 handle and should offer quite a bit of support. As long as that area is supportive, then I think it is only a matter of time before dips get bought into, but I do recognize that the 0.75 level is an area that will attract a lot of attention from both sides.
I think you can continue to look at this through the prism of a short-term “buy on the dips” scenario, but also recognize that we finally do clear the 0.76 handle, this market could really start to take off and go looking towards the 0.78 level. As things stand right now, it certainly looks as if that is the play, and it is worth noting that we have just formed a “W pattern”, which essentially measures for that same move. It is not until we break down below the 0.74 level that I would remotely consider shorting this market.
