- The AUD/USD has been trading within a consolidation area, with the 0.68 level acting as a short-term ceiling and the 0.66 level providing support.
- Although the currency initially attempted to rally during the trading session on Friday, it encountered resistance above the 50-Day EMA.
- As a result, the market is likely to experience more volatility and choppiness in the near future.
Traders should be mindful that the market is currently range-bound and trade accordingly. The market's noise level is expected to persist, and traders should take small positions and watch for short-term swings until the market picks a direction. Traders should avoid treating this as a longer-term opportunity anytime soon.
There is potential for a bearish flag pattern, which could result in a return all the way back down to the swing low near 0.62. However, it is too early to make that assumption, and traders should wait to see if the market begins to break down before acting on this possibility. That being said, we have not broken down below the bottom of the flag, so the actual signal itself has not kicked off quite yet. However, one would have to think that a lot of technical traders out there see the same thing, and therefore eventually it could become a bit of a self-fulfilling prophecy.
Be Cautious
On the other hand, if the market shows signs of life and turns around, it could break above the 200-Day EMA and open up the possibility of a move to the 0.69 level. Until then, traders should be aware that the market will likely continue to move back and forth in the consolidation area, with the 50-Day EMA serving as a crucial level of resistance. Ultimately, there is a lot of noise above that could come into the picture to cause headaches.
At the end of the day, the Australian dollar is currently trading in a consolidation area, and traders should approach the market with caution. The market's noise level is likely to persist, so traders should avoid taking large positions and look for short-term swings instead. While there is potential for a bearish flag pattern, it is too early to assume this will happen. Conversely, if the market shows signs of life and turns around, there is potential for a move to the 0.69 level.
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