The Australian dollar fell precipitously during the session on Thursday, crashing into the 0.78 level. This is an area where we have a bit of a “hard floor”, and having said that it’s likely that the buyers are going to jump back in. I think there is plenty of support down to the 0.7750 level, which was the scene of a major breakout recently. In fact, I think that this is an excellent buying opportunity if we show any signs of stability whatsoever. I think that the market would rally towards the 0.0 level above, which is a level that is massively important based upon historical charts going back decades. I believe that a break above the 0.81 level will send this market much higher, perhaps the 0.90 level above, and then eventually parity.
If we did somehow break down below the 0.7750 level, I think that the market will probably breakdown rather significantly, and could roll over rather quickly. However, I believe that there is plenty of support so I am more of a buyer that a seller. This is a market that has been very choppy as of late, but given enough time the buyers always return. If gold markets can rally, that could be reason enough for the Australian dollar to show signs of strength. Obviously, the US dollar is typically the opposite side of the gold trade, so it makes quite a bit of sense that it is influenced as well. Also, keep in mind that this is a bit of a “risk on/risk off” type of scenario as well, with this market rising when people are feeling a bit more interested in going long of risk assets. Obviously, the exact opposite trade is a possibility as well, as the US dollar is used as a safety vehicle.
Written by FX Empire