The Australian dollar has fallen during the trading session on Tuesday, as we have sliced through the 200 day EMA yet again. The 0.75 level is an area that has caused a lot of support recently, but at this point it certainly looks as if we are going to retest that area again. If we break down below the 0.75 level, especially on a daily close, it is very possible that the Australian dollar could find itself in significant trouble. In fact, it would be a significant support barrier in the rearview mirror and could open up a move of as much as 500 pips.
Keep in mind that the Australian dollar is highly sensitive to risk appetite, but perhaps more importantly the market also need to keep in mind that Sydney is locked down for a couple of weeks, and that of course does not bode well for the Australian economy as it seems like they cannot open up such as other economies can like the United States. With that being the case, it is very likely that will be a bit of negative pressure on the Aussie going forward. Beyond that, when you look at the longer-term charts, this area has been resistance more than once, and we could see this market dropping from here.
There is always the opposite scenario, so if we can break above the couple of shooting stars from both Friday and Monday, then it might offer an opportunity to go looking towards the 0.77 handle. That of course would be a very “risk on” type of move, something that suddenly does not look as feasible as it once did. In fact, we have the jobs number coming on Friday which could have a major influence on what happens next as well. Because of this, you need to be a bit cautious with your trade position, but as I look at this chart, I think if we make a fresh, new low, then it is time to step on the gas a little bit to the downside as there is probably a sizable “air pocket” underneath there. At this point, things look very ominous for the Aussie, especially as the US dollar seems to be strengthening against so many other currencies, and not just the commodity related ones.
