- The AUD/USD has bounced ever so slightly during the trading session on Wednesday as the 0.67 level continues to offer quite a bit of support.
- When you look at the longer-term shirts, the 0.67 level has been tested several times and is an area that has been defended vigorously going back years.
- We have broken down below it previously, and it resulted in a major collapse. The question is whether we can do it again.
I do think it’s very possible, especially as the US dollar continues to strengthen against almost everything. If we had got into a larger global slowdown, the Australian dollar would have negativity thrown at it via a lack of demand for commodities. In that scenario, it’s difficult to imagine anybody wanting down anything other than a US dollar, because everybody will be buying bonds.
Avoid Buying the Australian Dollar
A rally at this point could jump all the way to the 0.69 level and not really change much. That would just be a return to the 50-Day EMA, and the top of the range for the brutal Tuesday candlestick. One of the main reasons I think we did not break down below the 0.67 level during the day on Tuesday is that we simply got there too quickly. There was not enough momentum to keep it going. It is probably only a matter of time before we see the barrier broken, and once it does, there will be a lot of money to be made.
On the other side of the equation, if we can take out the 50-Day EMA, it’s possible that we could go looking to the 0.70 level, which is not only a large, round, psychologically significant figure, but it is also an area where we have seen noise previously. The 200-Day EMA sits a bit above there as well, so I think that also comes into the picture as far as resistance is concerned. I’ve got no interest in buying the Aussie, at least not yet. If the Federal Reserve suddenly changed its tune, or perhaps after the rate hike next week had a less hawkish statement, then you could make an argument for this, but right now there’s nothing on this chart that suggests you should be a buyer. Simple “bottom picking” it’s a great way to lose money.
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