The Australian dollar rallied significantly on Monday, as we have seen the 0.71 level offer quite a bit of support. That being said, the market was oversold to begin with, so it is not a huge surprise that we have bounced. The market is closing towards the top of the range which is a very bullish sign, and it looks as if the traders are trying to price in the idea of the Jackson Hole Symposium offering some type of headline when it comes to the greenback. After all, a lot of people out there are trying to price in the idea of tapering into the market, which means the US dollar will strengthen against almost everything, not just the Australian dollar.
That being said, the market is especially vulnerable over here as the Australian dollar has been suffering at the hands of the draconian Australian lockdowns to the economy. We are starting to see signs of the Aussie government recognizing that these lockdowns have done nothing but cause harm, and that it has not stopped the spread of coronavirus. If that is going to be the case, then the Australian economy might have a chance of some type of recovery. In that scenario, the Australian dollar will probably be very oversold.
All of that being said, the 0.73 level above should offer resistance, as it was previous support. Furthermore, we have completed the so-called “death cross” and now it looks as if longer-term traders are most certainly looking to the downside. The 0.71 level is nothing important from a longer-term standpoint, but the 0.70 level is much more important. The 0.70 level has not been tested, so it is only a matter of time before we get down to that area, unless we have seen the absolute lows, something that I do not believe quite yet. However, if Jerome Powell does suggest during the Jackson Hole Symposium that tapering is nowhere near getting ready to happen, then it is possible that the market may continue to go higher. I think this week’s going to be very noisy, but I would anticipate a lot of resistance near the 0.73 level to begin with. As things stand right now, I am looking to fade signs of exhaustion that I can take advantage of.
