The Australian dollar rolled over a bit on Monday, testing the 0.7750 level again. This was the scene of major resistance in the past, so I assume that there should be a significant amount of support in this area. Pay attention to the gold markets though, they of course have quite a bit of influence on what happens next with the Aussie. The Australian dollar should find buyers below, and perhaps a move above the 0.78 level could be the signal to start going long again. If we get a move above there, I think at that point the market will go looking towards the 0.0 level, which has been important going back decades. I think that the market will continue to be very choppy, but if we can break down to a fresh, new low, we could find ourselves dropping quite a bit. Under that circumstance, I would expect to see the market go looking towards the 0.75 level.
Remember that the Australian dollar is used as a proxy for China, as the Chinese Yuan isn’t traded freely. Because of this, you should pay attention to how trading is going on in Asia, because that will of course give some type of influence to the Aussie dollar. The Australians provide much of the necessary raw materials in Asia for construction, so therefore it makes sense that the market will continue to be influenced by Chinese, Indonesian, and Hong Kong markets. Longer-term, I think that the market should find buyers, but a break down to the 0.75 level with for the entire uptrend into question. I think that volatility is going to be a mainstay in this market, so at this point it’s only a matter of time before the market changes direction yet again, so short-term trading is probably about as good as this gets.
Written by FX Empire