The Australian dollar rallied a bit during the trading session on Tuesday to show signs of strength, reaching the 0.74 level before pulling back. The 50 Day EMA is sitting right in the middle of the candlestick, so that does suggest that we are going to see a certain amount of volatility in this area. This is especially true considering that the 200 Day EMA sits just below, and the area, in general, continues to be one that we have to watch as the region between these two moving averages continues to be an area where you would see a lot of noisy and supportive/resistive behavior.
If we were to break down below the 200 Day EMA, that likely that we will clear the 0.73 level, perhaps even below there to go looking to the 0.72 level as a target, and then possibly even the 0.70 level which is the larger support level from the longer-term standpoint. The 0.75 level is the top of the larger consolidation area, just as the 0.70 level underneath is massive support. All things being equal, this is a market that is in a massive range, and we are getting relatively close to the middle, so that tells you that we are close to “fair value.”
Rallies at this point would be a selling opportunity from what I can see, as we have seen so much in the way of nasty selling pressure, and of course, the area also marks where the Reserve Bank of Australia dropped the word “patience” from the statement, thereby having people lean to the upside, only to be followed by the FOMC Meeting Minutes where the Federal Reserve made it clear that they were much more hawkish than the market believed. As a general rule, when you get areas like this, there is a lot of volume that is difficult to overcome, so I do not think that we break out to a fresh, new high. The market then continues to see a lot of selling pressure on rallies, so I am going to be looking for selling opportunities on signs of exhaustion in order to get short yet again. After all, the US dollar has been strong against most currencies, and if we start to see selling pressure in commodities, that will add yet another reason to think that this market is going to fall.
