The Australian dollar has gone back and forth during the course of the trading session on Wednesday, to save itself near the 0.73 level. This has been an area that has been important for a while, so we need to pay close attention to the area to get a grip on where we go next. Ultimately, if we were to break down below the candlestick for the trading session on Wednesday, then this pair will truly unwinds.
Regardless, I think this is a market that sees plenty of resistance above, so if we do rally from here, I would take a look at exhaustion as an opportunity to get short yet again. The 0.74 level above is a major resistance barrier, as it is the top of the previous consolidation area that we had been in. With that being the case, the market still looks very bearish, but obviously we are quite ready to fall apart.
If the market was to turn around and take out the 0.74 level, then I will have considered the Aussie to have been “saved” after the pullback, so ultimately this could be a buying opportunity. Even if we do rally from here, the market is going to have to deal with the 200 day EMA above, which has offered a lot of selling pressure previously as well. In fact, the last time we got there the market acted as if it had just hit a brick wall. Beyond that, we also have a lot of resistance in the form of psychology when it comes to the 0.75 handle.
The market of course looks at the Australian dollar as a significant commodity currency, so therefore you have to pay close attention to commodities overall as it could give you a little bit of a “heads up” as to what the Aussie will do. Furthermore, the Australian dollar is also highly correlated to the Chinese economy, which has released a lot of negative economic figures over the last 24 hours, so I would not be surprised at all to see the Aussie struggle going forward based upon China alone. The US dollar is considered to be a “safety currency”, so if we get into a bit of “risk off” type of market, the Australian dollar will be one of its victims.
