The AUD/USD has initially pulled back just a bit during the trading session on Friday to reach down toward the bottom of the overall consolidation area that we have been in. At this point, the market is likely to continue to go back and forth and I think it’s only a matter of time before we have a selling opportunity.
- At signs of exhaustion, it’s likely that we will continue to see sellers, as the 0.64 level is an area of support.
- We continue to go back and forth in that area if we do get above there, as there is even more consolidation in that area.
- Keep in mind the part of the reason that the US dollar fell is that the Bank of Japan intervened and sold US dollars in order to save its own currency.
Ultimately, this is a market that I think will continue to see a lot of volatility, and therefore it’s likely that we get a sell off sooner or later. However, as the intervention was done on a Friday, it does make a certain amount of sense that we would see the market simply hang around as we try to figure out why to do next.
Sellers are on their way back
The lack of liquidity at the end of week also probably exacerbated the move against the US dollar, because nothing has changed longer term. Therefore I think it’s probably only a matter of time before we have sellers come back into the picture, due to the fact that the global risk scenario is not that strong right now. It makes quite a bit of sense that we would see the Australian dollar struggle as it is a commodity currency. Furthermore, you have to worry about the fact that the Reserve Bank of Australia has recently only raised interest rates by 25 basis points instead of the expected 50 basis points. This shows that they are concerned about the housing market in Australia as it is starting to crack. I think we continue to see the US dollar strengthen in general. At this point, I don’t have any interest in trying to get longer this market, and therefore I think I’m just simply going to sit and wait for signs of exhaustion to pick up “cheap US dollars.”
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