The Australian dollar initially fell during the trading session on Tuesday, but as you can see, it has bounced enough to show hesitation near the 0.73 level. This is a large, round, psychologically significant figure, and the fact that we ended up forming a bit of a hammer suggests that perhaps we could get a bit of a bounce. Nonetheless, I am more than willing to start selling on some type of rally that shows signs of exhaustion, so I will be paying close attention to the Australian dollar as it has been one of my favorite shorts over the last several weeks.
On the other hand, if we were to break down below the bottom of the candlestick for the trading session on Tuesday, it is very likely that the market will then go looking towards the 0.70 level, which is a large, round, psychologically significant figure as well. Also, the 0.7250 level is essentially “fair value” when it comes to dancing around between the major 500 PIP levels, as the 0.75 level above is significant psychological and structural resistance. Just above that level, we have the 200-day EMA that is flattening out, and it also shows that the market is about to form a bit of a “death cross”, as the 50-day EMA is racing down towards that area.
Nonetheless, I have no interest whatsoever in trying to buy this pair, because the Australian dollar will continue to get pushed again as the bond market has seen massive inflows of interest, and the Australian dollar is getting hammered due to the fact that the Australian economy has been locked down in bits and pieces. Furthermore, the Chinese economy has been slowing down, which works against the idea of the “risk on” type of trade, and the Australian dollar is a “risk on” asset in general. I do believe that it is only a matter of time before we start selling again, so I look at any bounce as a potential opportunity to get short yet again as the trend has most certainly shifted in this market, but it is possible that we may have simply just gotten a bit overdone in the short term. That does not necessarily mean that the move is over, and I still believe that this pair will eventually go looking towards the 0.70 level.
