The Australian dollar went back and forth during the course of the trading session on Tuesday, bouncing around the 0.76 handle. That being the case, I think that the market should be very volatile in this general vicinity, but as you can see I have a lavender rectangle above on the hourly chart that should signify resistance, especially near the 0.7650 level. Some type of exhaustive candle could be a scenario where I start to sell again, and of course I would pay attention to the gold markets to give us an idea as to where the Aussie should go next. It has been struggling as of late, but if we do breakout above the $1300 level significantly in the gold market, that should send the Australian dollar higher. Alternately, if we break down below the 0.7575 level, the market breaks down towards the 0.75 handle again. I think the risk appetite of the overall markets will have an effect on the Aussie as well, as it is considered to be a risk asset.
We are starting to see some strength in the Aussie though, and that may have to do with U.S. Congress looking less likely to pass significant tax reform. Ultimately, if we break above the 0.7650 level, I think we go to the 0.7750 level next. I do think that eventually will get some type of exhaustion though, and therefore I believe that the downside is much more likely. If stock markets roll over, that could give us an opportunity to start selling the Aussie as well, as it would show a general flight to safety, and that almost always means money flowing into the US treasury markets. Obviously, if you want to buy US treasuries, you need US dollars.
Written by FX Empire