The Australian dollar rallied significantly on Thursday, and it looks like the market is trying to save itself a little bit. That being said, I think it is probably only a matter of time before we see resistance come into the picture, so I will be looking to short this market. I want to pick up “cheap US dollars”, but we have gotten a little overdone. The fact that we ended up forming a nice-looking hammer during the trading session on Thursday, it suggests that we are going to bounce a bit.
The 0.6850 level is an area where we have seen both support and resistance previously, and then of course the 0.70 level could cause resistance. What I’m waiting for is a bit of a rally that we can fade at the first signs of exhaustion. With that being the case, I think we have a situation where you are going to have to take a moment or two and let the market bounce a bit. After all, the last thing you want to do is to chase the market at this point. However, if you get some type of opportunity to pick up dollars at a lower value, then by all means you should do so.
The Australian dollar is not going to be able to rally for a significant amount of time, due to the fact that commodities continue to take a bit of the bashing. As long as that's going to be the case, then it’s likely that we will see plenty of opportunities above. On the other hand, if we were to break down below the bottom of the candlestick on Thursday where the market turned around from, then we could go much lower. At that point, the 0.67 level would open up the possibility of a drop down to the 0.66 handle.
Ultimately, I think the only thing you can count on is a lot of volatility, but it is most likely that we will see plenty of traders willing to jump all over this market at the first signs of hesitation. I plan on being the same going forward. It’s not until we break above the 0.70 level that I would consider the turnaround important enough to pay close attention to. The 50-day EMA is just below the 0.70 level, and it’s likely that we continue to go lower.
Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex trading platforms to check out.