I am looking at this market through the prism of simply waiting for an opportunity to get short again.
The Australian dollar rallied a bit during the trading session on Friday, wiping out all of the losses from the trading session on Thursday. Because of this, the market looks as if it is trying to wipe out a lot of the negativity, but we have seen more negativity than just the Thursday session. In other words, I think we may have seen a little bit of short covering heading into the weekend, and the fact that yields did rise slightly during the trading session also helped as well. With this, I think it is only a matter of time before we see the selling pressure return based upon the overall noise that the market has been going through.
The Australian dollar is suffering at the hands of the fact that the Aussies continue to lock down their own economy, which is a great way to do serious damage to your own economy. As long as that is going to be the case, then it is very likely that the Aussie will continue to have a little bit of an anchor around its neck. The 200-day EMA currently sits at the 0.7532 level, an area that is right in the middle of the previous consolidation, so at this point I think it is only a matter of time before we would see sellers jump in.
What I am looking for is some signs of exhaustion that I would consider shorting again, as the 50-day EMA is starting to reach towards the 200day EMA and could form the “death cross” that so many people pay close attention to. With that, I think it is only a matter of time before we will eventually see more negativity. The bond market selling off a bit and seeing a little less inflow was a good sign, but at the end of the day it was just a simple bounce as well, so I think it is probably only a matter of time before we see a continuation of what had been previously. With that being said, I am looking at this market through the prism of simply waiting for an opportunity to get short again. However, if we break above the 0.76 level, then I think we will recover fully and go back towards the highs.