- The AUD/USD experienced a tumultuous trading session on Wednesday, as it attempted to rally but found itself thwarted once again at the 0.64 level.
- This stubborn resistance zone has been a recurring headache for traders, further compounded by the proximity of the 50-Day Exponential Moving Average, creating a formidable ceiling in the market.
- Adding to the Australian dollar's woes is the prevailing strength of the US dollar, which remains robust compared to most other currencies, keeping the "safety trade" sentiment alive and well.
Should the Australian dollar fail to hold above the 0.6275 level, there is a substantial risk of a deeper decline, potentially testing support at the 0.62 level, with a potential rebound point at 0.60. Conversely, a successful breach of the 0.64 level could signal a significant breakthrough, not only overcoming the resistance barrier but also challenging the 50-Day EMA. In such a scenario, the market may ascend towards the 0.65 level, although the presence of substantial selling interest at that level could lead to renewed shorting activity.
The performance of the Australian dollar is intricately tied to risk appetite and global growth, aligning closely with commodity markets. While commodities have shown strength, primarily driven by rampant inflation across the global economy, this environment tends to favor a cautious "fade the rally" approach. Historically, the Australian dollar has demonstrated reliability on the short side whenever it has attempted upward moves.
I am Still Fading Rallies
Currently, there is little appetite for buying into this market, barring an unexpected surge beyond the 0.66 level, which coincides with the 200-Day EMA indicator. Such a scenario would necessitate a complete reevaluation of the prevailing conditions. However, given the existing geopolitical uncertainties and the persistently high interest rates in the United States, the odds of such an upside breakout appear slim. Consequently, the overall bias remains tilted towards the downside.
In the end, the Australian dollar continues to grapple with formidable resistance levels, with market sentiment influenced by the prevailing strength of the US dollar and global economic uncertainties. Traders are cautiously eyeing support levels, and a breach below 0.6275 could open the door to further declines. While the Australian dollar's fate is closely tied to global growth and commodity markets, the prevailing "fade the rally" sentiment suggests that shorting opportunities may persist, barring any unforeseen developments.
Potential signal: I am still fading rallies. I am selling again near 0.64, around the 0.6380 level. The stop loss will be 0.6420, with a target of 0.63 handle.
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