The Australian dollar initially rallied during the trading session on Friday to reach above the 0.76 handle only to pull back a bit in hesitation. That being said, the 0.76 level is an area that I have been paying attention to for some time, as it previously had been significant support in the past. That support extended down to the 0.75 handle, where we have tested the absolute bottom.
Looking at the daily candlestick, we ended up forming a bit of a shooting star, and as most of you know, a shooting star typically signifies that there might be selling pressure ahead. What is worth noting is the fact that the US dollar has strengthened a bit late in the week, and we are starting to see a lot of people question whether or not there is going to be tightening out of the Federal Reserve, or for that matter whether or not we are going to see economic growth going forward. After all, a lot of people are concerned as to whether or not the rest of the world is going to come along with the United States, as the Biden administration seems to be making progress on infrastructure spending. Furthermore, the United States is far ahead of other economies, so that could come into play as well.
One thing that most people are not paying attention to is the fact that China seems to be slowing down a bit, which has a direct effect on the Australian dollar, as the Australian economy is so highly levered to the Chinese mainland and what is going on there. Beyond that, commodities will continue to push this market around as well, and if the commodity markets start falling, it is very likely that the Australian dollar will as well. However, if we clear the most recent low, it is likely that the market would go down towards the 0.71 handle, possibly even the 0.70 level, as it would be a major breach of support. On the other hand, if we turn around and break above the top of the shooting star from the Friday session, then it is likely that we could go looking towards the 0.77 handle above. One thing I think you can count on is a lot of choppiness.
