The Australian dollar has rallied a bit during the course of the trading session on Thursday to go looking towards the 0.74 handle. This is an area that has been rather important a couple of times, so should not be a huge surprise that we ended up back here to test it for resistance. At this point, I suspect there is only a matter of time before sellers come back, but the question now is whether or not it is going to be at the 0.74 level or the 0.75 level?
Another thing to pay attention to near the 0.75 level is that the 200 day EMA sits just above it. Furthermore, we also have the 50 day EMA getting ready to cross below it. This is the so-called “death cross”, that a lot of longer-term traders pay close attention to. Signs of exhaustion will be sold into for what I can tell, and at this point in time it is more than likely going to only be a matter of time. This is a market that I think will continue to see a lot of noisy behavior, but at the end of the day I think this is a market that will eventually find enough momentum to finally make a bigger decision.
If we were to turn around a break down below the bottom of the recent lows, then it is likely that the Australian dollar will go looking towards much lower levels, perhaps reaching down towards the 0.72 level, possibly even as low as the 0.70 level after that. After all, the 0.70 level underneath is a large, round, psychologically significant figure that will attract a lot of attention and of course will be aiming for by the bearish traders out there. That being said, you should also keep in mind that the Federal Reserve is doing everything it can to kill the US dollar, as the statement and the meeting were both very dovish during the previous trading session. Ultimately, I think this is a market that could continue to punish the US dollar, especially if we get some type of inflationary hit. That being said, I think this is a market that also will have to pay close attention to China, as Australia is so highly correlated to that economy as well, which has shown some cracks as of late.