The Australian dollar has bounced significantly during the trading session on Friday as the 50 day EMA has held again. We ended up forming a bit of a hammer during the trading session on Thursday, and now that the Friday session has broken above there it is likely that we could go looking towards the 0.78 level. The 0.78 level of course is a large, round, psychologically significant figure, but it is also an area where we have seen previous resistance. We have broken above there once before though, so it does make sense that we could see the market go through there again, especially as we have closed at the very top of the range.
By doing so, it is very likely that we will continue to go towards the 0.80 level, an area that is important on the longer-term charts. In fact, I believe there is a significant amount of resistance that extends from the 0.80 level to the 0.81 level, which could open up the possibility of a huge move to the upside. At that point, the market would be free to go looking towards the 0.90 level from a longer-term standpoint, as the US dollar has been struggling in general, so it makes sense that it also provides a bit of a tailwind in this market.
If we did turn around a break down below the Thursday level, then it is possible that the market could go looking towards the 0.76 level underneath which is a major support area that extends down to the 0.75 handle. This is a market that is being thrown around by the idea of inflation, the reopening trade, and then of course all of the noise coming from both Canberra and Beijing. There has been a lot of bickering between the Aussies and the Chinese, as the trade tensions continue to mount. With that being the case, this is a market that continues to be very choppy so I think that you will have to be somewhat patient with your trade, but it certainly looks as if we are going to go higher more than anything else. I am building a small position, and then adding to it as we continue to see the greenback loses overall momentum as the Federal Reserve is likely to continue loosening monetary policy.