The Australian dollar struggled a bit as we initially tried to rally on a gap higher on Monday, only to turn around and fall. That being said, I think that the market continues to see the area just above the 0.71 level as significant support, although we are trying to form a bit of a longer-term “double bottom” in that general vicinity. However, it does not take much imagination whatsoever to see this as an “M pattern.” If we break down below the 0.71 level, I think this market has much further to go.
The market will probably bounce though, because we are so oversold. I would love to see a move towards the 0.72 level to start shorting, or better yet somewhere near the 0.73 level. I do not know that we will get there, and I may be stuck shorting this market on a break down to a fresh, new low. Either way, it is worth noting that the Aussie has been in trouble for a while, so the negative candlestick on Friday probably does not mean much at all.
The 50-day EMA is starting to slump lower, and I think it would probably offer quite a bit of resistance. The 50-day EMA is an area that a lot of people will pay close attention to due to the fact that it is such a widely followed technical indicator. On this chart, I see nothing that tells me to start buying anytime soon, although I do recognize that a bounce makes quite a bit of sense. If we break down below the lows, then we could go looking towards the 0.70 level rather quickly, followed by the 0.68 level, which has been important multiple times over the longer term. That is an area where I have seen a lot of action previously, and I think it would attract a lot of attention the next time we get there. As far as buying is concerned, I would need to see this market take out the 50-day EMA to have that as a serious thought, something that I just do not see happening in the short term. At this point, the Aussie looks very threatened, especially as the greenback has been relatively strong against almost all currencies.
