The Australian dollar initially tried to rally during the trading session on Wednesday, but then gave up all of those gains to reach below the 0.75 handle. The 0.75 level is an area that has been important more than once, and it is very likely that we are trying to build up the necessary pressure to break it down. At this point, we now need to look at the recent bounce as a potential support level. If we break down below that level, then it is likely that the market will drop rather precipitously, as we are starting to see US dollar strength in general.
To the upside, the 200-day EMA is offering resistance, but it is essentially flat at this point, and it looks like the market needs to make a bigger decision sooner rather than later. If we continue to see US dollar strength in general, the Australian dollar is likely to come completely apart. This also makes sense considering the fact that Australia is so highly linked to the Chinese economy, which is starting to show significant cracks.
Beyond that, we also have Sydney locking down for at least two weeks, which is a very negative sign for the Australian economy. Beyond that, the United States is in the midst of opening up and it looks like the labor economy in the US is red hot, so this jobs number on Friday will be crucial as well. This is a market that is starting to rollover rather drastically, and if we can break down below the most recent low, then it is likely that we would drop towards the 0.70 level, which means that we would be looking at a five-handle move roughly.
On the other hand, if we broke above the 0.77 handle, it would be a very bullish sign, as it goes right along with the 200-day EMA, but it also will show that we could go looking towards the 0.7750 level. It is all about the US dollar at the moment, and the US dollar seems to be strengthening, so it does make sense that we are going to see the Aussie pay the price.
