The Australian dollar initially rallied during the trading session on Wednesday, but gave back the gains as the 0.78 level continues to be a massive resistance barrier that the markets have been struggling to get above. Because of this, it is not a huge surprise to see that we have now turned around to fall towards the 50-day EMA. The 50-day EMA has been not only supportive for the market, but it has also been a bit of a magnet for price as well. With this being the case, I think the market will probably find reasons to go back and forth until we get some type of certainty. Yes, we do have the reopening trade going on right now, but it is worth noting that the Australian dollar has recently ignored that.
The market continues to go back and forth, so I think what we are looking at here is short-term range-bound trading at best. However, if we can break to the upside, then we could go looking towards the 0.79 handle. If we break above that shooting star from a couple of weeks ago, it is likely that we would go looking towards the 0.80 level after that. The 0.80 level is a major resistance barrier that a lot of people will be paying attention to, as it has been crucial on the monthly charts as well. In fact, I believe there is a significant amount of resistance that extends 100 pips above there, but if it gets broken through, then the Australian dollar is very likely to go looking towards the 0.90 level. In other words, it becomes a massive “buy-and-hold” type of situation.
To the downside, we need to break through the 200-day EMA, but if we do, then we would slice through the 0.75 handle and go looking towards the 0.70 level underneath which is massive support as well. Even though that is a rather difficult move and would be rather negative, the reality is that the longer-term uptrend would still be fairly strong, even with that type of pullback. This is a market that I think will eventually show us an impulsive candlestick, but we do not have it yet.