The Australian dollar went sideways on Friday, as we have reached the 61.8% Fibonacci retracement level from the weekly move. We have recently broken down below massive support, and I now think that the 0.7750 level above is massively resistive, and it’s not until we break above there that I would consider buying this market. In the meantime, I look at any signs of exhaustion on a rally as an opportunity to pick up value in the US dollar, which looks likely to continue to strengthen. The US dollar strengthening of course has a negative effect on this pair, but also is an especially negative in this pair as the gold markets will roll over as well, a major driver of the Australian dollar in general.
I think at this point, we are more than likely going to go down to the 0.75 level underneath, which has a certain amount of psychological importance. A move lower than that should reach the market down to the 0.72 level. If we were to break to the upside, it’s not until we clear the 0.78 level on a daily close that I would be comfortable going long, which at that point I would anticipate a revisit to the 0.80 level above which of course has been massively important going back decades when it comes to the value of the Aussie. I think that the market continues to be very choppy, but I certainly think that it’s only a matter of time before the sellers have their way. It will be noisy, so I suspect that it’s probably best to short this market in small increments, adding as we become more profitable. This is probably the best way to trade a very uneasy market that I can think of.
Written by FX Empire