The Aussie dollar has had a wild ride during the trading session on Thursday, initially market participants looked like they were going to continue more of the same bullish “risk on” behavior. Ultimately, the Australian dollar is a currency that a lot of people get their hands on in times of bullish behavior, but we have seen quite a bit of noise during the day that suggests people are starting to become a bit more concerned. With this, a breakdown below the 200-Day EMA could send the market crashing toward the 0.65 level, which of course is a large, round, psychologically significant figure and an area where a lot of people would be paying close attention. Breaking down below the 200-Day EMA could be a very negative sign.
On the other hand, if we turn around and take out the recent highs that were made on Wednesday, that would obviously be very bullish. There’s also the possibility that we could see a lot of back-and-forth action in this area, trying to digest some of the gain, so we could just be entering a noisy area of choppiness, which would also make a certain amount of sense as well. After all, hope burns eternal, and a lot of people are trying to find some type of reason to get bullish on the world. The market continues to pay close attention to the bond markets, and with rates plunging the way they have in the United States, we have seen the US dollar sold off drastically. However, eventually that has to turn around, if for no other reason than just to catch its breath, and that might be part of what we are seeing.
Expect a lot of volatility, keep your position size reasonable, and pay close attention to the highs from Tuesday and the 200-Day EMA indicator, as they can give you a certain amount of clarity as to where the market may go next. With this, it’s likely that we will continue to see volatility pickup, not slow down anytime soon. Caution is the better part of valor, so make sure you keep that in mind when trading the Aussie.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.