- The Australian dollar continues to see a lot of choppy behavior as we continue to hang around the 0.67 level, which is an area that I think has been like a magnet and an area that I think a lot of people will be paying close attention to.
- If we turn around and go looking to the 0.6750 level, which is an area of resistance, if we can break above there, then it is likely that we will go much higher, perhaps to the 0.69 level.
- If we break down below the 0.6650 level, then I think you have a deeper correction just waiting to happen.
This is a market that has been very noisy over the last several weeks, but let’s keep in mind that it is a little bit different in the sense that the Reserve Bank of Australia is likely to hike rates going multiple times forward. With that being the case, it does make the Australian dollar a little bit more resilient.
A Proxy for Growth
The Chinese manufacturing sector is starting to pick up, and that, of course, demands more hard materials coming out of Australia. With that being the case, I think you have a situation where the Aussie is a proxy play for that growth situation.
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If we do have a major risk-off type of event, that obviously helps the US dollar, but over the intermediate term, I don’t really see much out there that could change the trend significantly.
Nonetheless, we are in an area where there has been a lot of contention recently, so I think short-term traders are probably going to continue to be attracted to this pair as they can trade back and forth. But in the longer term, it does look like the Australian dollar may make a little bit of a bigger move to the upside if you are just patient enough. Pullbacks are certainly possible, but the Aussie has been so resilient in comparison to other currencies that it is not necessarily one I want to short.
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