The Australian dollar fell significantly during the trading session on Wednesday to break down below the 0.7150 level and go looking to test the 50-day EMA.
The 50-day EMA has been like a short-term trendline for a while, and it now looks as if buyers will continue to at least attempt to protect it.
If we break down below there, then it could open up a move down to the 0.70 level but right now, I'm not overly concerned about that because the Reserve Bank of Australia has actually raised rates, which is quite a bit different than most other central banks around the world.
The commodity situation also can help the Australian dollar against the US dollar over the longer term. So I think if anything else, the market is probably more or less through the prism of a less bad type of situation.
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If the market were to turn around and rally from here, then I think we could break above the 0.72 level and then go looking at the recent highs. All things being equal, I do think this little drop gives us an opportunity to start buying again and, in that environment, I think the longer-term uptrend probably tries to continue to drive this pair.
If we see some type of panic out there where people run to the US dollar, perhaps seeing interest rates skyrocketing in America, then we could break down. But if we see that, then I'm going to be shorting other currencies against the dollar much quicker than I would like this one. One particular potential victim of that trade would be the New Zealand dollar, as New Zealand is definitely in much worse shape than Australia.
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