At this point, I would not be surprised at all to see the market fall right back into this larger consolidation area, with the 0.64 level offering a bit of a “midpoint” in the pair. After all, we have gotten far ahead of ourselves, so a little bit of a pullback makes quite a bit of sense anyway. With this, you have to assume that there will be buyers underneath, but also we have to assume that the longer-term trend does come into play given enough time. After all, the Australian dollar had been falling for a reason, not the least of which is that traders around the world are not too happy to take a lot of risks at the moment.
Friday was a very bullish day, which is something that you have to be cognizant of. However, a lot of this was probably due to the jobs number in America more than anything else, as traders are trying to delude themselves into believing that the Federal Reserve is just around the corner from loosening monetary policy. We are nowhere near there, so with that being said it’s worth noting that the market is going to continue to see plenty of reasons to be concerned about tight monetary policy, and of course the global economy is a bit of a mess as well.
Remember, Australia is all about the commodity trade, and therefore the Aussie dollar is highly sensitive to that. If the global economy is in fact slowing down, it makes a lot of sense that you would see the Australian dollar pay the price. I don’t essentially think we’re going to fall apart from here, but a pullback into the consolidation looks more likely than not. However, if we were to turn around and take out the 0.6575 level, then by extension we would cross the 200-Day EMA. That seems unlikely, but it’s something to keep in the back of your mind.
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