Right now it looks like confusion will be the word of the day, as we simply cannot seem to get direction together.
The Australian dollar rallied a bit on Tuesday but gave back the gains to form a bit of a shooting star yet again. By doing so, it looks as if the market will continue to see the Australian dollar as a currency that is more than likely going to struggle, as we are right in the midst of a major consolidation area between 0.73 on the bottom and 0.74 on the top. The 200-day EMA currently sits just above the 0.74 handle, so it offers a significant amount of resistance as well. At this point, we have to ask the question as to whether or not the Australian dollar has peaked.
It will be interesting to see how this plays out, because the shooting star forming is a very negative look. That does suggest that perhaps we are running into a bit of trouble right now, and that the market will continue to show this as being a very difficult area to overcome. With this being the case, I am looking toward shorting this pair if we can break back down below the 0.73 level. If we cannot, then it is likely that we will see a lot of noisy behavior.
On the other hand, if we were to break above the 0.74 level, then it is likely that this market would continue going much higher. At this point, it would open up the possibility of a move towards the 0.75 level initially, followed by an even bigger move. This is a market that I think will show plenty of momentum in one direction or the other, but right now we just do not have enough clarity to get involved with any significant amount of money. In other words, I believe that I will be getting involved once we get a significant move, and then just simply add as I believe this market will probably trend for quite some time once we get a little bit of certainty. Once that happens, I think you will have an opportunity to make a bigger trade, but right now it looks like confusion will be the word of the day, as we simply cannot seem to get direction together.