Potential Signal:
- I am a seller here with a stop loss at 0.6720 and a target of 0.65 below.
- The Australian dollar failed to hold gains, shows signs of a potential double top, and remains capped below key resistance.
- Risk sensitivity, weak relative performance, and global trade concerns keep the outlook bearish unless resistance breaks.
The Australian dollar initially tried to rally during the trading session on Monday but has given back those gains rather quickly. Because of this, there is a situation where the Aussie is in the midst of attempting to form a double top, going back to September, essentially. With that being the case, the idea of the Australian dollar shorting from here is preferred, perhaps down to the 0.6550 level where the 50-day EMA resides. It is also recognized that the Australian dollar is highly sensitive to risk appetite and, of course, to concerns around the world about whether or not global trade continues to pick up. At this point in time, there is a very real possibility that the 0.67 level continues to be a major ceiling in the market that cannot quite be broken above. There is a lot of noise right in this neighborhood that the market happens to reside in at the moment. But when looking at the longer-term perspective, this is a market that has rallied quite nicely and then just went sideways most of this year, from the beginning of May to now.
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I Still Don’t Like the AUD
This is a market that I have not found very impressive. Even when there is a lot of US dollar selling, quite often the Australian dollar is a big laggard. When looking to buy the US dollar, the Australian currency is typically the one to sell against it. There are other ones, such as the New Zealand dollar, for much of the same reason as well.
But keep in mind, Australia is held hostage by the rest of the world and global trade as well as commodity demand, although commodity markets have been good. It has been for reasons other than actual economic growth. With that, the outlook remains bearish. But if there were to be a break above the 0.6750 level, then there is a longer-term bullish move just waiting to happen. As things seem this looks like the same consolidation that has been in place.
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