The Australian dollar initially tried to rally on Tuesday but gave back the gains rather quickly. By doing so, the market looks likely to see further downward pressure based upon the way we closed, and now it looks like if we break down below the 0.72 handle, then the market is likely to go looking towards the 0.71 handle. That is an area that has been important previously, as we have bounced from there quite significantly.
At this point, we also have to take a look at the 0.71 level as an area that could offer a floor, but if we were to break down below there then it is likely that this market would go looking towards the big figure, whic is the 0.70h level. Anything below there would be a major selloff in this market just waiting to happen, as the markets will clearly have been battered significantly enough to have even the most bullish of Aussie dollar traders start selling off.
The market breaking above the highs of the day could open up a move towards the 50-day EMA, but I think it is only a matter of time before the sellers come back. In fact, as far as I can see, the 50-day EMA is a major indicator that a lot of people pay attention to, as we have been drifting lower for a while. If we break above there, then it is likely that we will go looking towards the 200-day EMA above at the 0.7450 level. The market is likely to see a lot of “sell on the rallies” situations, with plenty of negativity out there as people are concerned about China at the moment. That has a major influence on the Australian dollar, as the Australians send a huge portion of their commodities towards the mainland in China. With that being the case, the market is likely to continue to see the concerns in China as a weight around the neck of the Australian dollar going forward. Furthermore, there has been a huge auction that went really well for bonds in America, which also drives up the value of the US dollar as demand is most certainly there.
