Expectations of heightened volatility persist, necessitating a cautious approach to initial position sizing.
- During the early hours of Friday's trading session, the AUD/USD experienced a substantial decline.
- However, in a surprising turn of events, it rebounded and made a determined push towards the crucial 0.65 level. This level, marked by its roundness and psychological significance, has previously served as a formidable barrier, characterized by a massive shooting star pattern.
- Furthermore, the 200-Day Exponential Moving Average (EMA) looms above, poised to offer resistance, reinforcing the likelihood of fading any rallies that may emerge.
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It is essential to bear in mind that this market is inherently noisy, and it closely tracks the Australian dollar's status as a "risk-on currency." Therefore, it is imperative to interpret the price action in the context of ongoing geopolitical developments, which are obviously a complete mess at this point. The current market scenario appears to be a relentless attempt to breach a major resistance barrier, but the presence of the formidable 200-Day EMA above makes it a daunting task. Should this barrier be surpassed, it would open the door to a move towards the 0.66 level. Such a development would signify a substantial weakening of the US dollar, a prospect that seems to be actively pursued.
On the contrary, if a decline ensues, sellers are likely to target the 50-Day EMA below. A break below the Friday candlestick's low could signify a descent towards the 0.64 level, a zone of great significance as it has previously acted as both support and resistance. It serves as the midpoint within the broader consolidation area that has encapsulated the market's movements.
Be Cautious with Position Sizing
Expectations of heightened volatility persist, necessitating a cautious approach to initial position sizing. As the trade unfolds favorably, it may be prudent to incrementally add to one's position. At present, the Australian dollar appears to favor short-term trading within a range-bound environment. However, it is evident that the market is knocking on the door, striving to break free from its current range. In summary, the prevailing driving force in the market continues to be volatility, overshadowing other factors and creating an environment where being cautious and keeping your position size under wraps will be the best thing you can do.
Potential signal: If the pair drops below the 0.6465 level, a short-term selling trade could happen, aiming for the 0.6385 level. The stop would be at the 0.6510 level.