The AUD/USD currency pair has finished the week in the middle of consolidation, seemingly content with doing very little in what would have been a thin session on Friday. While the Europeans of course were at work, the Americans were not so by the time we got to midafternoon in Europe, the liquidity may have dropped off a bit.
AUD/USD Breakout and Pullback Scenarios
The size of the candlestick shows just how un-interested most people were during the day, but it should be noted that we are sitting just below the 0.68 level, an area that has been important a couple of times. If we can break above that level, then the next thing that the Australian dollar will have to deal with is the 200-Day EMA. Breaking above that could open up the Australian dollar to go looking toward the 0.70 level above. The 0.70 level is an area that a lot of people will pay attention to because it is a large, round, psychologically significant figure.
On the other hand, the market were to pull back from here we could fall right back into the consolidation area, reaching down to the 50-Day EMA, which this just below the 0.66 level. The 0.66 level also features the 50-Day EMA, which is an indicator that a lot of people pay attention to. Breaking down below there opens up the possibility of a move down to the 0.65 handle, where we have broken out from previously.
Keep in mind that the Australian dollar is highly sensitive to commodities and Asia in general. China is busy locking itself down, so it’ll be interesting to see whether or not the Australian dollar starts to react to that. The last couple of days would have had less liquidity than usual, so I do think that we will have to pay close attention to the Monday candlestick more than anything else.
Conclusions
- As long as we stay between the 200-Day EMA above and the 50-Day EMA below, it’s difficult to imagine that this market is going to be anything other than choppy.
- However, once we break out from between these 2 moving averages, we could get a little bit more of a sustainable move, probably right along with other risk assets around the world.
- With this, paying close attention to this next week could give you a bit of a “heads up” as to how we finish the year.
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