The Australian dollar pulled back a bit after initially trying to recover on Friday. By doing so, it shows just how much trouble we are finding at the 0.75 handle, and that it is probably going to take a bit of momentum building to finally make that move higher. If we can stay above the 200-day EMA, it is very likely that this market will continue to go higher over the longer term. That being said, the US dollar got a bit of a boost during the day when Jerome Powell reiterated the need for tapering, which is a bit surprising that it was surprising to the market.
At this point, if we can break above the highs of the Thursday session, then the market is likely to continue going higher, perhaps attacking the 0.76 handle. The US dollar has been soft against multiple currencies, but the Australian dollar has been a bit of a laggard, right along with the euro. At this point, it will be interesting to see whether or not that continues to be the case, as the US dollar has been getting beaten up on against pretty much everything. At this point time, the market is trying to figure out whether or not the commodity markets will push the Aussie higher, or if we are going to continue struggling to hang on to gains.
From a market structural perspective, you can see that we have recently made a “higher low”, followed by a “higher high.” In fact, we ended up forming a massive “W pattern”, which is very bullish in and of itself. I think short-term pullbacks will probably continue to be bought into, and as a result you need to see this as a market that is trying to build up the momentum to go higher. Based upon the measured move, we could go looking towards the 0.78 level again. That being said, if we were to turn around and break down below the 0.74 handle, it could send this market back down towards the 50-day EMA, maybe even the 0.73 level after that. The market is likely to continue being noisy, but at this point it looks as if it is trying to turn things around overall.
