- The AUD/USD initially tried to rally during the session on Friday but gave back gains as the market has been turned around.
- The speech at Jackson Hole by Jerome Powell was much more hawkish than people anticipated, so at this point, it looks like the US dollar is being flocked to yet again.
- As I record this, we are breaking back down below the 0.69 level, and therefore it’s possible that we could go much lower.
Breaking down below the recent pullback opens up the possibility of a move down to the 0.68 level, possibly even the 0.67 level. This is a market that has been negative for quite some time, and it is starting to look a lot like the stock markets, so it seems as if we are going to follow stock markets as far as risk appetite is concerned. Rallies at this point still look to be very tentative, and at the first signs of exhaustion, I am more than willing to start shorting.
Downward Pressure Ahead
The 50-Day EMA sits just above and is offering a significant amount of technical resistance, sitting just below the 0.70 level. The 0.70 level is an area that obviously is a large, round, psychologically significant figure, and an area that you will be paying close attention to. The size of the candlestick also tells me that we more likely than not will continue to have downward pressure, so I think it’s essentially a situation where we have already made up our minds as to which direction we are going.
It’s not unless something changes quite drastically with the Federal Reserve that I see this market changing, and it’s hard to imagine that they would immediately after talking about how hawkish they wanted to be. In fact, it’s not even that they were leaving much doubt, it’s just that traders for whatever reason chose not to pay attention to the Federal Reserve. I think they finally got the picture during the Friday session, so we should resume US dollar strength going forward. With the type of move that we have seen, do not be surprised to see a little bit of a short-term relief rally, followed by another hard pounding to the downside. It’s difficult to imagine what’s going to change the market, and that’s not going to be anytime soon.
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