- The AUD/USD initially experienced a pullback during Tuesday's trading session but eventually reversed course and rallied toward the 50-Day Exponential Moving Average.
- The 50-Day EMA is a widely followed indicator, and its flat trajectory indicates a need for overall short-term directionality in the market. When analyzing the Australian dollar, it becomes apparent that the 0.66 level has played a significant role in the past, once again providing support during the recent attempted breakdown.
- It is worth noting that the American Independence Day holiday will have taken a lot of liquidity out of the markets so Tuesday will be taken with a grain of salt in this environment.
Above, the 0.68 level has proven to be a region of substantial resistance in previous instances. However, the 200-Day EMA between the current price and that resistance level adds another layer of significance, warranting close attention. Overall, the Australian dollar is indecisive, oscillating back and forth without a clear trend.
It is important to note that the Australian dollar is highly correlated to the commodities market, necessitating careful monitoring of commodity prices. Additionally, paying attention to developments in Asia is crucial, as it has a significant impact on the Australian dollar. Given the multitude of factors at play, the Australian dollar is likely to remain volatile in this environment. As a result, it is prudent to exercise caution and carefully consider position sizing.
Be Cautious
In the event of a breakdown below the 0.66 level, it would open the door for a potential move toward the 0.65 level, which previously served as a bounce zone. Further downward momentum could lead to a decline to the 0.64 level, representing the original "measured move" of the consolidation area. Conversely, a breakout above the 0.68 level would pave the way for a move toward 0.69, followed by the psychologically significant 0.70 level.
Ultimately, the Australian dollar currently grapples with indecision, oscillating in a range amid short-term fluctuations. The 0.66 level continues to provide support, while the 0.68 level acts as significant resistance. With its close correlation to the commodities market and the influence of developments in Asia, the Australian dollar remains prone to volatility. Traders should exercise caution and remain mindful of position sizing in this dynamic environment as traders try to determine whether we have growth or recession ahead.
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