Potential signal:
- I am fading this move again.
- Selling with a stop at 0.6715 and a target of 0.65 below.
- The Australian dollar remains rangebound despite a modest recovery, with persistent U.S. dollar strength limiting upside. Key technical levels define potential moves, but fading rallies is favored amid weak momentum and broader macro uncertainty.
The Australian dollar has recovered just a touch during the trading session on Thursday. And I think that's somewhat telling because, quite frankly, the U.S. dollar has performed fairly well considering that year-over-year CPI was 2.7 instead of 3.1, which the market anticipated. This tells me that the market is still somewhat concerned, and I still think there are enough dollar bulls out there to keep certain markets in a range. This is most certainly one of them. The Australian dollar has been in a range for quite a while, and I just don't see that changing.
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I have a level that I'm watching, and I think at this point, the 0.67 level is pretty straightforward as far as a ceiling is concerned. If we can break above there, then you can make a real argument that we could go higher, perhaps at that point in time, maybe a couple of hundred pips, but I still favor fading rallies. There just isn't enough momentum in this pair for me to get really excited about owning the Australian dollar.
Key Technical Levels and Macro Considerations
Furthermore, you do have to worry about the whole idea of US and Chinese trade, which the Australian dollar is a proxy for in a lot of ways. And of course, the commodity markets have been strong. And that helps the Australian dollar. But that's pretty much the only thing that I see driving the Aussie to the upside at this point.
I do prefer to fade those rallies that show signs of exhaustion, aiming for the 0.6550 level and then the 200-day EMA. All of this being said, if we were to break down below 0.64, I think in that scenario, you not only break down rapidly, but you probably see the US dollar crushing almost everything else out there. I do favor the dollar. I'm not looking for a massive move. I think we're just kind of stuck in malaise here.
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