- Other than bouncing around in the resistance area that has been crucial over the last few sessions, the Australian dollar hasn't done much over the past couple of days.
- I believe that could continue to be the way forward, but PPI on Thursday could have an influence on it as well.
AUD/USD Continues to Range Trade
The Australian dollar has essentially stayed put where it has been for the entire week. Despite the volatility, this indicates to me that traders are attempting to make a breakthrough. They simply don't yet have the necessary momentum. We have to pay attention to the PPI numbers now, which could have the same effect—we just don't know—partially because the markets were all over the place on Tuesday as a result of the CPI numbers. The most important factor in this equation is to remember that the dollar will move in response to those US inflation figures.
You must keep an eye on global events because the Australian dollar is heavily correlated with commodity markets and, of course, global growth. The Australian economy itself is almost taken for granted, as the main topics of conversation are whether or not the Chinese economy is doing well, whether or not large volumes of commodities are being traded, and whether or not demand will increase. From a technical analysis perspective, there has been some strong resistance around the 0.6650 level. Furthermore, the 200-day EMA is providing support underneath. At least for the time being, from a longer-term standpoint, there is strong support located at 0.6450, the bottom of a consolidation block that I have highlighted on the chart. We'll never know if that is truly tested again, but you do need to exercise caution because things can move quickly and violently here.
Nevertheless, it appears that we are having difficulty breaking above last week's Friday candlestick, which could be a very bullish sign for the Australian dollar. I believe that, in the near future, there will still be a great deal of loud behavior and senseless trading. This could be useful for range-bound trading if you are a short-term trader, but anything beyond that would be challenging in this setting.
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