The Australian dollar initially fell during the trading session on Tuesday to reach down towards the 0.76 level. We have turned around to show signs of life again, and it certainly looks as if we are going to attack the 50-day EMA just above. It is worth noting that the candlestick for the trading session was a bit of a hammer, which is very bullish. Furthermore, we formed a hammer for the weekend that does suggest that perhaps we will get a bit of a bounce, maybe in a reopening trade-type of attitude.
The Australian dollar has formed a shooting star for both February and March, so that does keep me a bit hesitant as far as buying is concerned. That typically means something a little bit more important on longer-term charts, which makes sense considering that we have recently pulled back from the 0.80 level. That is an area that is crucial on the monthly charts, as it would represent an attempt to change the trend to the upside for the long term again. In fact, I believe that this is an area that has about 100 pips-worth of resistance, so if we can break above the 0.81 handle, then I believe it becomes more or less a “buy-and-hold” type of situation until we get to the 0.88 level.
If we turn around and break down below the lows of last week, then I believe that the market will break down rather significantly, perhaps following the trajectory of those monthly candlesticks that I previously mentioned. That suggests that we could go down to the 0.71 handle. Do not get me wrong; there are plenty of support levels underneath that could cause some noise on the way down, but it would also kick off a move lower, based upon not only being hammered, but a measured move of the head and shoulders that formed. At this juncture, I do think that although we are trying to pick ourselves up, the reality is we still have a lot of concerns out there when it comes to the global growth and reflation trade, but it should at least in theory help the Aussie dollar if we continue to see more of a bullish attitude when it comes to the reopening situation.
