The Australian dollar tried to rally during the trading session on Tuesday, reaching towards the 0.68 level yet again. As we have seen over the last several days, plenty of sellers continue to jump in. At this point, it looks as if we are going to continue to consolidate overall, perhaps getting used to the idea of being down at this lower level. At this point, I think that any rally will end up being a selling opportunity as the Australian dollar is a proxy for China which of course is producing some of the worst economic numbers that we have seen in the last 35 years.
To the upside, if we were to break above the 0.6833 handle, then we could go towards the 50-day EMA which is pictured in red on the chart. At this point, the 0.69 level is also resistance, so I would be more than willing to sell signs of exhaustion near there as well. Ultimately, I think that signs of exhaustion continue to attract a lot of attention. Quite frankly, the Australian dollar is in a lot of trouble not only because of China, but also the fact that the global economy is starting to slow down. If that’s going to be the case, then there will be a lack of demand for commodities in general such as copper, iron, and aluminum.
Looking at the US dollar, it continues to strengthen and therefore I think it makes sense that this pair continues to go lower. I think that the hammer from a couple of weeks ago will probably be tested to the downside, perhaps sending this market below there and looking towards the 0.65 handle underneath. That is a level that has been massive support on monthly charts, so I do think that it’s only a matter of time before we would get some type of bounce from that level. If we were to break down below the 0.65 handle, that would be extraordinarily negative. At this point though, I don’t have any interest in buying this pair until the US/China trade situation gets better, or at least the global growth situation gets better. Neither one of those look likely to happen in the short term so I think we should simply play this to the short side, perhaps continue to trade this range, or taking advantage of short-term rallies that show signs of exhaustion.
