The Australian dollar slow down a bit during the trading session on Thursday, as the Australian dollar has perhaps bounced a bit too hard. At this point, we are still very much in a downtrend so it should not be a huge surprise to see that the 0.72 level caused a bit of a problem. The market will continue to be very noisy, but at the end of the day I think we are best served waiting for some type of rally with exhaustion that we can start shorting. The 0.72 level of course causes a certain amount of noise, but I do think that ultimately this is a market that could go a little higher. The 50 day EMA is at the 0.7263 level and racing lower. Any rally at this point in time that starts to show signs of exhaustion, I am more than willing to get involved in.
I look at this chart, I recognize that the 0.70 level is a massive support level that we need to keep an eye on, as it will obviously attract a lot of attention. We have formed a massive bounce from that level, so whether or not we have enough momentum to continue is a completely different question, but right now it certainly looks as if it is a short-term floor. Obviously, a lot of people will be psychologically attracted to that level as well, so this being the case it is more likely than not that it continues to be an area that will be difficult to overcome.
If we do break down below the 0.70 level, the market will more than likely plunge towards the 0.68 handle. With that in mind, I would become aggressively short of this market underneath that region. The breaking down through all of that noise of course would be a very negative turn of events and at this point I think we probably have plenty of shorting. If we turn around and break to the upside, it is not until we clear the 0.73 level that I would truly be impressed. Keep in mind that Australia is highly levered to China, which of course is a bit of a mess at the moment with Evergrande and multiple other issues going on at the same time.
