AUD/USD Forecast: Signs of Weakness in Potential Breakdown

Christopher Lewis

I believe that in the short term, we will continue to see sellers jump in and fade short-term rallies.

The Australian dollar fell on Tuesday to show signs of weakness yet again. The 50-day EMA has offered significant resistance again, and despite the fact that the CPI numbers from the United States failed to live up to expectations, the Australian dollar fell against the greenback. In fact, by the time we got towards the end of the day, it looked as if the greenback had seen a little bit of a bid.

We are closing towards the bottom of the candlestick so it makes sense that we will continue to see downward pressure, and given the fact that the market cannot seem to pick itself up, I believe it is only a matter of time before we go looking towards the 0.73 handle. Breaking down below that level then opens up the possibility of a bigger move to the downside. At that point, I would anticipate a move down to the 0.71 handle, which is an area where we would see a lot of noisy behavior.

To the upside, the 0.74 level offers a lot of resistance, assuming that we can even break above the 50-day EMA. Ultimately, if we can break above the 0.74 level, then it is likely that we will go looking towards the 200-day EMA above at the 0.7461 level. Above there, we have the 0.75 level offering significant resistance as well. The 0.75 level is a large, round, psychologically significant figure, and an area that would attract quite a bit of headline attention. Breaking above that would make this more of a “buy-and-hold” type of situation.

However, you should pay close attention to what is going on in China and the credit markets. There are a lot of concerns about the Chinese economy suddenly, and that will have its negativity felt in the Australian currency, due to the fact that so much of the Australian economy is so highly levered to supplying China with its raw materials. As long as there is trouble in China, there is going to be trouble in Australia. Furthermore, the US dollar did rally quite a bit later in the day against multiple currencies, so this may be something worth paying attention to in general. I believe that in the short term, we will continue to see sellers jump in and fade short-term rallies.

AUD/USD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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