The Australian dollar pulled back from the 200-day EMA on Monday, which sits just below the crucial 0.73 handle. The 0.73 level has been important multiple times, so I do think it makes sense that we would see this market failing a bit. Now the question is whether or not we are going to see the market try to break above there, or if we are going to see the market try to carve out some type of consolidation between the 0.73 handle on the top, and the 0.70 level on the bottom.
I do think it is probably more likely that we will see some type of range, simply because the Australian dollar is such a “risk-on” type of currency, and you have to be very cautious in this type of environment to get overly bullish on it. After all, Australia is highly levered to the global economy which seems to be struggling. With that being the case, I think we will continue to see a lot of money moving towards the US dollar, as the market has a lot to worry about coming out of the Russia/Ukraine situation, inflation, and of course just a general slowdown.
It is worth noting that the shooting star-shaped candlestick is a bearish signal that a lot of people will be paying attention to, and it happened at that important core door of resistance. There is also the previous uptrend line that is now offering resistance as well, so I certainly think that the next day or two should give us an idea as to where we will go long term.
On the other hand, if we do close above the 0.73 level, then I think it is likely that the market will go looking towards the 0.75 handle, but we would have to have a lot less fear in the market. The 0.75 level has been important multiple times, so I think that is where you would see more pushback. This is a market that I think is going to fall over the next several days, so I am looking to short the Aussie at this point in time. I suspect that the Aussie has gotten a little overstretched.
