I think the market is trying everything it can to find a reason to go higher, but it just does not seem to have it right now.
The Australian dollar recovered during the trading session on Friday after the jobs number came in at 559,000 jobs added during the previous month. There were “whispers” of an addition of 1 million jobs on Wall Street, which most certainly was starting to get concerned about the idea of the Federal Reserve tapering quantitative easing, and therefore the US dollar did strengthen as a result. However, as the jobs number came out, traders started to drift away from that narrative and sell the market return back to where it had been previously. In other words, we are range-bound and going nowhere.
The 50-day EMA is flat and seems to be a bit of a magnet for price in general. Because of this, it is likely that we will continue to see the same range come into play, with the 0.78 level offering resistance, while the 0.76 level underneath continue to offer support. At this point in time, the market is likely to see a lot of choppy behavior, and if we do not get any type of change, it is likely that we will continue to see a lot of this same short-term behavior. I think the market is trying everything it can to find a reason to go higher, but it just does not seem to have it right now.
If the Federal Reserve is not going to taper, then it comes down to whether or not we can have some type of commodity-induced movement. When you look at the longer-term charts, the Australian dollar going sideways does make a certain amount of sense considering that the market had rallied so significantly to get here. In fact, we are simply working off some of the froth from before, so I think when I look at this chart, although it is a bit difficult to trade with any type of conviction, the real prize is the 0.80 level and whether or not we can get above there. If we clear that area, it should open up a move to the 0.90 level. On the other hand, if we were to break down below the 0.75 level, then it would slash through all support and probably drop another 500 pips at that point in time. One of the things that is making this pair a bit sluggish is the fact that China and Australia are in a bit of a trade spat so that is not helping anything either.