It is very possible that we see sellers sooner rather than later.
The Australian dollar has rallied significantly during the course of the trading session yet again on Thursday, as we continue to see an attempt to break out to the upside. It is obvious that there are a lot of people trying to push the Aussie higher, and even though that is the case, I still do not think that we are quite ready to take off to the upside. The 50 day EMA is going to come into the picture, so that is worth paying attention to. Furthermore, you can see that I have the area highlighted that had previously been so important, so the fact that we are back near that area suggests that we may run into a little bit of trouble.
Quite frankly, the market is likely to see this area above as being difficult, but at this point in time it is very likely that we will see a lot of trouble just above. In other words, even if we do rally, I think it is likely that it will take a significant amount of momentum to finally break out. Nonetheless, this is a market that I think will continue to attempt to go higher. That being said though, we run into more exhaustion, we could turn around and reach towards the area just above the 0.72 that has been significant support. If we were to break down below there then I think the market goes much lower, perhaps down to the 0.71 handle. This is an area that has been supportive in the past, so it would not be overly surprising to see that as a target. That being said, it does not look as if the market is ready to break down yet, so it is difficult to get overly bearish at the moment.
This is all about the US dollar and of course the significant concerns when it comes out of China, as the Evergrande default is something that is front and center. As the company is likely to be restructured, there will be a lot of concern in the Chinese economy and whether or not the demand for Australian hard commodities will continue. Furthermore, the market also has to deal with the fact that China and Australia are not exactly on the best of terms right now, so is very possible that we see sellers sooner rather than later.