The Australian dollar rallied on Monday, breaking well above the 0.75 level during the day, and crashed into the 0.7540 level. This is an area that could feature some resistance based upon a cluster from April 25, so I’m not excited about buying in this general vicinity. I think at the very least the market needs to pull back, and of course gold markets will need to be influential as well. With this in mind, I believe that we will probably pull back to the 0.75 handle, but at that point I would anticipate we could see some buying pressure. I think that the real decision will be made in the gold markets, so therefore we have to pay attention to what happens at the $1260 level. That is an area that is massively supportive currently, so I think pullbacks that show signs of support and more importantly a bounce from there could push the Aussie higher.
With all that in mind, if we broke above the 0.7560 level, we then could go much higher, perhaps reaching towards the 0.7580 level and then the 0.76 handle after that. The market will of course be very volatile but I think were a little overextended so I do prefer a little bit of a pullback in order to at the very least put a bit of “value” in the market. The Australian dollar has rallied far too strong in the last few hours to think that we aren’t susceptible to sudden pullbacks, and this will certainly be the case if there’s any type of “risk off” type of move or geopolitical concern. After all, that tends to have people running for the US dollar as they put money into treasury bonds. Currently, I believe that volatility is here to stay.
Written by FX Empire