The Australian dollar has gone back and forth during the trading session on Monday, forming a bit of a neutral candlestick. We are currently trading between the 50 day EMA on the bottom and the 200 day EMA on the top, so it will be interesting to see where this breaks out to. If we can get a move outside of these levels, then it’s likely that we can go further. A break above the top of the candlestick from the trading session on Monday would be very bullish, perhaps driving this pair back towards the 0.69 handle. I do expect a lot of noise there but if we can break above it, that would be an extraordinarily bullish sign.
To the downside, I see the 0.6850 level offering quite a bit of support and we did in fact see a bit of a recovery from that level. The neutral candlestick is one that is worth paying attention to, because it is an idea where we are seeing a bit of stability, and a bounce from here makes quite a bit of sense. However, if we were to break down below the 0.68 handle, then the trend itself would be reasserted to the negative.
The Australian dollar is very sensitive to the Chinese economy, so pay attention to what’s going on over there. That being said, the trade war resolution, at least the “phase 1 deal” is a good sign but Austria also has some other things going on right now, not the least of which would be the wildfires. People are speculating that the RBA will cut rates soon due to the financial disaster that could turn out to be. Regardless though, the Australian dollar is that an extraordinarily low level, so that is something to pay attention to.
I think the one thing you can probably count on over the next couple of days is very choppy trading but that is in any different than the last couple of weeks. If that’s going to continue to be the case, then building a position size slowly is probably the most prudent thing to do. By breaking above the downtrend line previously, it does suggest that the market is trying to change the overall trend, and if that’s the case it’s not overly surprising that trading has been so sloppy as of late, because quite frankly that is normal in one of the situations.
