The Australian dollar has bounced a bit during the trading session on Tuesday as we have seen a huge move in favor of the greenback against almost everything. At this point, the Australian dollar had gotten oversold so therefore we are trying to recover a bit. That being said, it does not mean that the trend has changed, and it doesn’t mean that you should be a buyer.
At this point, the 0.68 level should be short-term resistance, right along with the 0.6850 level. Any bounce at this point in time that shows signs of exhaustion, will be thought of as a selling opportunity. I would be especially interested in the 0.6850 level, because it has proven itself to be important multiple times. Even if we break above there, then I would be paying close attention to the 0.70 level, which should also cause issues.
On the other hand, if we were to turn around and break down below the 0.67 level, then the market has the ability to drop quite significantly. At that point, I would anticipate that the Aussie will go looking to reach the 0.66 level, an area that has been important multiple times in the past. Breaking down below there then opens up another 100 pips to the downside. That being said, I think the only thing you can count on is a lot of noisy behavior, and therefore I think you need to look at it through that type of prism.
The Australian dollar is highly levered to commodity markets, especially hard commodities such as gold, iron, and copper. Those are all commodities that are taken a bit of a beating due to the fact that most people anticipate markets having to deal with a recession soon. If that’s going to be the case, then it makes no sense that the Aussie should rally. In fact, what I find interesting is that since we had the RBA surprise interest rate hike, the Australian dollar has only fallen. Obviously, the Federal Reserve is much tighter than the RBA, so that also favors the US dollar as we see interest rates in America continue to spike much higher against many other currencies, including this one. I have no interest in buying this pair, at least not until we break above the 0.70 level, and we have some type of fundamental reason to do so.
