The Australian dollar experienced a significant rally during the trading session on Friday, challenging the critical 0.67 level. This area has been important on multiple occasions in the past, making it unsurprising that it has created difficulties for the currency. The 0.67 level had provided massive support just weeks ago, and with "market memory" returning, resistance now extends to the 0.68 level. To turn bullish on the Australian dollar, the AUD/USD currency pair must move beyond these levels.
Last week's massive negative candlestick further complicates the situation, as the market is now testing the top of that candlestick. This indicates that a substantial number of orders in this area could cause challenges. The 50-Day EMA, located around the 0.68 level, is dropping sharply. The recent "death cross" event, where the 50-Day EMA crossed below the 200-Day EMA, serves as an additional bearish signal for long-term traders.
The 0.6550 level appears to offer some support, as evidenced by the recent bounce from this level. A breakdown below this level could see the market drop to 0.64 or even 0.63, opening up the possibility for further downside movement. This scenario aligns with the current risk appetite, as traders grapple with uncertainty about the economy's direction. The Australian dollar is highly sensitive to commodity markets and mainland China, Australia's largest trading partner.
A potential hit to global growth could place pressure on commodity currencies, with the Australian dollar being one of the first targets for short positions. Should the market break above the 0.68 level, the 0.69 level could come into play, though reaching this level would require a considerable effort. If that were to happen, you would probably see the US dollar fail against most currency, not just the Australian dollar. In other words, it would be a “market wide” currency move.
AUD/USD Today's Technical Outlook
- Ultimately, the Australian dollar's rally has encountered key resistance levels, with economic uncertainty contributing to market challenges.
- Resistance at 0.67 and 0.68, alongside the bearish "death cross" event, has created a difficult environment for the currency.
- Support at 0.6550 provides some stability, but breaking below this level could lead to further declines towards 0.64 or 0.63.
- As traders attempt to navigate the uncertain economic landscape, the Australian dollar's performance will continue to be influenced by global growth prospects and its ties to commodity markets and China.
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