The Australian dollar has broken down a bit during the course of the trading session on Thursday to make a fresh low. In fact, we have broken down below an area that had been the cause of the most recent bounce in this market, which of course is a very negative sign. Essentially, we have made a “lower low.” That of course is a very negative sign and therefore I think a lot of people are going to get involved to the downside.
In the short term, we may have a little bit of a bounce, but it is not until we break above the 0.7650 level that I think we clear all of the recent selling pressure. After all, we have formed a couple of shooting stars that would be cleared to the upside in that scenario, offering the market the possibility of going towards the 50 day EMA. Breaking above the 50 day EMA could send this market looking towards the 0.7750 level.
To the downside, if we do continue to see negativity it is likely that we go looking towards the 0.71 handle. Quite frankly, I think it is going to take a certain amount of effort and time to get down there. We have the jobs number coming out on Friday and that of course will have its own influence on what happens next in this pair, due to the fact that the US dollar of course will be moved around quite a bit by that announcement, and it obviously is half of the equation in this market. The one thing the need to pay attention to is the fact that just after the jobs number comes out, most American traders will probably be thinking more about Independence Day than they will be trading. In other words, I expect Friday to be very choppy for a few minutes, and then suddenly die off.
This of course could be a bit different if we find some type of major shock in the announcement, but at this point in time I doubt we are going to see much more than a sudden surge in one direction or the other, and then a quiet market. I anticipate that we will see more downward pressure going forward though, because from a technical analysis standpoint, this market is barely hanging on and certainly looks vulnerable at this point.
