The Australian dollar has rallied just a bit during the trading session on Friday, as we continue to look at the 200-Day EMA underneath as support. We have bounced from there, and now it looks like we are trying to hang on to the uptrend. Ultimately, the 0.67 level above is a short-term resistance barrier, but if we clear that, then it’s likely that the Australian dollar goes looking to the 0.69 level. On the other hand, if we turn around and break down below the 200-Day EMA, then it opens up the possibility of a drop down to the 0.65 level.
All things being equal, I think this is a situation where you have to look at it through the prism of trying to find value, and it’s also worth noting that we are going to see a bit of consolidation in this general vicinity. That should lead to shorter-term choppy conditions, and therefore you need to be cautious about your position sizing. The position sizing will be crucial, because it can lead to disaster if you are overextended in this type of environment. Quite frankly, I think this is a scenario where the trading environment remains very noisy, as the Australian dollar is so highly levered to risk appetite.
Pay attention to the interest rate situation in the United States, because if those rates start to drop again, that will almost certainly lead to this pair rallying. Lower interest rates should continue to have people looking outside of the United States and further on the risk appetite spectrum, and therefore it becomes something that is worth pondering.
In general, I do believe that the buyers are starting to overtake the entire situation, but I also recognize that we have a situation where the end of the year typically has people looking for risk appetite and furthermore, those who are extraordinarily bullish of the US dollar and have been short of this pair all year will probably be taking profit as well. That does suggest that the Australian dollar is more likely to go higher than lower, but it’s not until we break out of this short-term range that you can put any serious money to work.
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.