- The AUD/USD has done very little during trading on Monday, which is not a huge surprise considering how many banks were closed.
- While the markets are hanging around the 0.68 level, it may be just important to recognize that we are near the 200-Day EMA.
- We are also in a channel that needs to be paid attention to, and so far, seems to be respected.
If we were to turn around and break down below the 50-Day EMA, then the market opens the possibility of a drop to the 0.66 level. Anything below that level could really start to apply even more downward pressure on the Aussie, which would more likely than not be a bit of a reaction to the global economy and the issues that it almost certainly will be facing over the next several months. We have seen the Aussie grind a little bit higher due to hawkish RBA behavior, but you also must keep in mind that the Australian dollar is highly sensitive to commodities, so if they start to fall apart, then this pair will as well.
The situation in China Affects the AUD
On the other hand, if we continue to “whistle past the graveyard” and expect the global economy to simply take off, then the Australian dollar is probably one of the first places you would get long. After all, there is a huge correlation between the Australian economy in Asia, which is one of the faster-growing parts of the world. Unfortunately, China continues to suffer from the pandemic, and it seems to be having a lot of problems internally. Because of this, I think Austria will always be vulnerable to the noise coming from the Chinese mainland.
If we were to break to the upside, I recognize that the 0.70 level should be important, and most certainly paid close attention to it because it should offer a bit of the ceiling. Anything above there then would almost certainly turn the entire turned around and have the market chasing the Australian dollar to the upside over the longer term. It’s not my call now, but I do recognize that it’s a crucial level on longer-term charts, and therefore a lot of people will react when we see that level overtaken by going to the upside.
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