The Aussie dollar initially tried to rally during the trading session on Tuesday but broke down to show signs of weakness yet again. Ultimately, we have formed a bit of a “tweezer top” pattern, which sits just below the 50-day EMA. With that being the case, the market is likely to continue to see sellers, perhaps trying to push it below the 0.73 handle. That is a large, round, psychologically significant number, and breaking below it will attract a certain amount of attention.
That being said, there is an uptrend line that we need to pay close attention to that I have marked on the chart, and it does suggest that we have further to go to the downside. If we can break down below that uptrend line, then it is very likely we will go looking towards the 0.72 handle. That is an area that has seen support previously, but what we are seeing here is a divergence between central banks, with the Federal Reserve looking to taper, while the Reserve Bank of Australia is seemingly very dovish. With this being the case, the fact that the Australian dollar has taken its cue from the rest of the currencies around the world, it makes sense that the US dollar flexing its muscles will continue to work against this pair.
As far as buying is concerned, I would need to see the tweezer top taken out to the upside, and even then, I think it is really not a buying opportunity until we get a daily close above the 50-day EMA. Breaking above there then puts the 200-day EMA in the crosshairs, followed by the 0.75 handle. The Australian dollar continues to be a proxy for China, which has been struggling. The Aussie dollar is technically still in an ascending channel, but at this point it is most certainly being threatened, which makes sense as the US dollar tends to move in the same direction against most currencies. The New Zealand dollar has made a “lower low” during the trading session, so it is very possible the Aussie may follow as the two are so intertwined. Either way, this is a very weak-looking chart, despite the fact that I would expect a certain amount of a pushback underneath.
