Potential signal
I am selling here.
I have a stop at 0.7140 and a target of 0.6960 area.
The Australian dollar gapped lower to kick off the trading session on Monday, only to show signs of strength. That being said, later in the day we have seen interest rates in the United States climb a bit, and that has put more pressure on the Aussie dollar.
I think at this point in time it is very likely that we will continue to see downward pressure because there are a lot of concerns coming out of the Middle East, and of course, the idea that perhaps the supply chain is going to remain broken for quite some time. Traders are chasing those higher yields in America, and I think traders are also trying to price in the idea that the Federal Reserve may have to stay tighter for longer.
The Federal Reserve is considered to be the world's central bank, and what I mean by that is if they keep rates tight, that makes dollars stronger, and it makes funding debt around the world and getting liquidity via the Eurodollar system much more difficult for other countries.
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Macroeconomic Disruption and Technical Support
Australia is in a precarious situation because, quite frankly, they are hoping for Asia to pick up, and Asia unfortunately gets most of its oil through the Strait of Hormuz. In other words, there is a major disruption coming, and quite frankly, some of the countries in Asia are already starting to feel it. Australia won't be any different, and they will continue to feel that pressure.
I think at this point, after the action on Friday, it's possible that the AUD/USD pair could go down to the 0.69 level, where we would see a bit of structural support, but we also see the 200-day EMA coming into the picture.
I like shorting this pair, but if it were to break above the 0.7150 level, then things start to change again. Ultimately, the Australian dollar has been a better performer against the US dollar until the last couple of days, so we will have to see. I would not put a huge position on.
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