The Australian dollar has rallied again during the trading session on Tuesday, breaking the top of a shooting star like candle on Monday which of course is a very bullish sign. Furthermore, we have cleared the 50 day EMA so the next argument now is going to be the 0.65 handle above. Signs of weakness will be sold into, because quite frankly we have gotten so far ahead of ourselves it isn’t even funny. After all, unless of course we are suddenly going to get a massive economic recovery, the Australian dollar has no business being this high. This is simply a bear market rally that has punished a lot of traders.
I anticipate that there is an area near the 0.65 level that will continue to cause issues, so therefore I’ll be looking for price action in that general vicinity to trade from. As far as buying, the market has moved far too quickly to be believable, and as a result I am looking for an opportunity but one of the hardest parts about fading a rally like this is being patient enough. I anticipate that on the next day or two, we should get a signal to start selling. I wouldn’t be able to buy a pair, because quite frankly the time to do that was a long time ago.
On a break down from here or near the 0.65 handle, I am willing to aim for the 0.62 level. This pair has gone parabolic, so sooner or later people are going to be looking to take profit if for no other reason than that. However, I think it’s only a matter of time before some type of negative headline freaks the market out again. Coronavirus numbers seem to be picking up again in places like Singapore, and that’s not a good sign for global growth. If we get a second phase of virus contagion, the Australian dollar is going to go screaming towards the bottom again. If we do break above the 0.66 handle, then the Australian dollar will have recovered for a longer-term move, and probably grind higher for the next several years. I don’t see that happening, and I certainly think it’s ridiculous to contemplate that, but it is what it is, and you can either try to be right, or be profitable. Sometimes the two aren’t necessarily the same thing. This chart is a perfect example of that.