The Australian dollar initially fell on Friday to reach down towards the 0.7350 level. This happens to be the 50% Fibonacci retracement level from the most recent swing high, so it will be interesting to see if this holds. At the end of the day, we had broken higher to break back above the top of the 50-day EMA, and perhaps more importantly, from a technical analysis point of view, form a hammer.
The hammer is a candlestick that almost everyone will pay attention to, so one would think that it would only be a matter of time before buyers come in and try to break the top of it. If they do, we could see this market go looking towards the 0.75 handle. The Australian dollar has taken a bit of a beating over the course of the last week or so, due to the fact that the Reserve Bank of Australia decided not to sound very hawkish. A lot of people have been expecting some type of tapering announcement, which they chose to punt on. (It should be noted that the Bank of England did the same thing.)
Looking at this chart, it is obvious that we have been chopping along, and I think at this point in time we are trying to decide whether or not the reopening trade is going to continue to drive up the need for commodities. From a longer-term standpoint, it almost certainly will have to, and therefore it should eventually help the Australian dollar. The Aussie dollar has been punished due to the lockdowns in that country, but at the end of the day it looks like the government is finally starting to think about reopening the economy, as it has caused far too many issues. Furthermore, we have concerns in China when it comes to the global economy, and that has a negative effect on the Australian economy as well.
Nonetheless, you should keep in mind that markets are somewhat forward-looking, and they are trying to price in what could happen sometime in the next six months, not the next six minutes. It is because of this that you will sometimes see markets move before the actual news comes out. The Australian dollar rallying against the US dollar also makes sense because the jobs number in America was so strong, and people believe that there will continue to be demand from the consumer.
