The fact that we are closing near the bottom of the overall trading range suggests that we should have plenty of downward momentum, and therefore I think we do break down below the 0.64 level, perhaps reaching down to the 0.63 level.
- The AUD/USD has sold off significantly during the trading session on Friday, as we continue to threaten the bottom.
- At this point in time, the market is likely to continue to see a breakdown, as the 0.64 level is an area that people were going to be paying close attention to.
- Short-term rallies will almost certainly be sold into, as the Australian dollar is in serious trouble at this point.
Even if we do rally at this point, it’s very likely that we will only have a certain amount of momentum and real estate that we can cover before we go higher. Ultimately, I like the idea of fading a certain amount of exhaustion above, especially if it’s near the 0.67 level. The 0.67 level is an area that has been supported previously, and therefore is likely that we have a bit of “market memory” in that area.
Wait for Opportunities to Pick Up Cheap Dollars
The fact that we are closing near the bottom of the overall trading range suggests that we should have plenty of downward momentum, and therefore I think we do break down below the 0.64 level, perhaps reaching down to the 0.63 level. Ultimately, this is a situation that I think will give plenty of opportunities every time we rally, and therefore I think we have a situation where you need to pick up “cheap US dollars” if you get the opportunity, as the Australian dollar will continue to be sensitive to commodities and the Asian markets.
The 50-Day EMA is below the 0.68 level and is starting to race towards the 0.67 level. Looking at this chart, it is a little overextended, so at this point it’s likely that we would see a bit of recovery, but that recovery is going to be short-lived at best. Furthermore, there are plenty of geopolitical risks out there as it looks like Ukraine may attempt to join NATO, and that has people nervous as well. Unfortunately, there is a huge chance that we will continue to see a lot of concerns out there, and therefore I think we will continue to see a lot of negativities, so therefore I think now it’s likely that you will continue to fade short-term rallies anytime you get an opportunity. In general, I think we’ve got a situation where we will see volatility, but also negativity.