The Australian dollar rallied significantly during the trading session on Tuesday, using the RBA announcement as a bit of a catalyst. However, there are several other reasons that the market is going to continue to struggle. The 0.76 level above looks to be offering resistance, and now that we have rallied to that area, the hourly chart is showing signs of exhaustion on the stochastic oscillator. If we get a roll over from here, essentially a move below the 0.7560 handle, I think we will go back down towards the 0.75 level, and make another attempt to break down below there. Once we do close below that level, the market goes down to the 0.7350 level. Alternately, a move above the 0.76 level should send this market towards the 0.77 handle after that.
In general, I think we continue to see bearish pressure, as gold hasn’t exactly taken off to the upside, and of course there is a strong chance that we see several interest rate hikes coming out of the United States, which of course drives demand for the US dollar. With a lack of demand for gold longer-term, and of course the US dollar strengthening, we could continue to fall from here. I also recognize there is a massive amount of resistance that extends at several different levels to the 0.80 level, and therefore I think that it’s difficult to buy the Australian dollar anytime soon.
I believe volatility will continue to be a major issue in this market, and typically when there’s a lot of volatility like this, scared money runs towards the US dollar. I believe that we continue bearish in general, and by being patient and waiting for exhaustion, you can profit by shorting the Aussie dollar.
Written by FX Empire