- The AUD/USD pair has dropped during the Friday session to test the 0.69 level.
- This is a market that continues to be highly sensitive to the overall risk appetite around the world, which of course is waning.
- Pay close attention to is the fact that the Australian dollar is highly sensitive to the Chinese mainland economy, so therefore you need to keep in mind that everything that’s going on in China has a major influence here.
- The Chinese economy seems to be slowing down, and there are a lot of concerns about what’s going on over there.
If we break down below the lows of the trading session on Friday, I think it opens up the door to a move down to the 0.67 level. The 0.67 level has been important a couple of times, going back several years. If we break down below that level, then it opens up the possibility of a move to much lower levels. In that situation, I would fully anticipate that the market will go looking to reach the 0.65 level.
Change in Trend
On the alternate scenario, if we were to break above the 50 Day EMA, something that I don’t see happening very easily, the 0.70 level should be resistance, followed by the 200 Day EMA. The 200 Day EMA being broken to the upside could be thought of as a change in trend, but I would not hold my breath for that happening easily. We would need to see the US dollar loses strength across the board, although it must be noted that the Australian dollar has been a bit of an outlier when it comes to dealing with the greenback, as so many of the other currencies have done far worse than the Aussie.
I do think that this remains a “fade the rally” type of market, but that’s the same thing that you can say about most major currencies against the US dollar. As yields will almost certainly rise next week due to central bankers speaking at the Jackson Hole Symposium, I think this continues to put downward pressure on this market as the US dollar will remain King when money tightening policy continues to be the norm for most central banks. Because of this, I’m looking for opportunities to fit short-term rallies, but if we do break down below the Friday candlestick I would not hesitate to start shorting either.
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