The Australian dollar initially tried to rally during on Monday but seems to be struggling near the 50-day EMA. Perhaps more importantly, it is the 0.74 level, which is an area that is a large, round, psychologically significant figure, so that being said I think it is only a matter of time before sellers would return. That is exactly what has happened in the short term, and it will be interesting to see if we can take out the 0.73 level to the downside.
Keep in mind that there is a lot of resistance just above, not just at the 50-day EMA, but also the 200-day EMA which sits at the 0.7476 level. I think there is a lot to choose through in order to get long of this market, but if we did somehow break out to the upside to take out the 0.75 handle, that would be pretty impressive. At that point, you have to think that the Australian dollar is going to be one of the biggest gainers against the greenback, because it is at such a big figure. Keep in mind that the Australian dollar is highly levered to commodities, so it does tend to be a little bit volatile in general.
The uptrend line underneath should continue to be very important, so if we break down below it, that could unleash a fresh wave of selling a currency that has been underperforming for a while. Beyond that scenario, you also have to keep in the back of your mind that the Reserve Bank of Australia has recently decided to be a bit more dovish than people had anticipated, so that does no favors for the Aussie dollar itself. Keep in mind that the Federal Reserve is starting to taper already, while the Aussies do not look anywhere near ready to do so. It is also worth noting that the Australian economy had been locked down so long it is difficult to imagine that it will suddenly boom. With this in mind, this pair will be highly sensitive to the overall risk appetite of traders in general, so keep that in the back of your mind. Pay attention to multiple markets, to see whether or not people are willing to put money to work.
