The Australian dollar fell again during the trading session on Monday, as we continue the same choppy and sideways behavior that we have been and for what seems like a lifetime now. The 0.73 level underneath continues to be massive support, while the 0.74 level above continues to be massive resistance. The 100 point range that we have been in has been very important and well-defined, so I think that if and when we finally get a breakout or a breakdown, the market continues to be short-term focus more than anything else and will be very noisy.
Quite frankly, I am a bit surprised that the Australian dollar has held up as well as it has, mainly due to the fact that there are so many things out there pushing the risk appetite lower that one would think that the Aussie would be toasted by now. However, when I look at the Chinese economic numbers, I do still believe that we are going lower, but we need to see a daily close below the 0.73 level to get going to the downside. At that point, I believe that the market goes looking towards the 0.70 level underneath, which is of course a large, round, psychologically important figure, and will attract a lot of headline attention.
On the other hand, if we turn around a break above the 0.74 level, then the market is likely to look towards the 0.75 level above. The 0.75 level of course will attract a certain amount of attention in and of itself, especially as we have seen so much in the way of support and resistance there, and then the “death cross” that sits just above that level as well. In other words, I think it is only a matter of time before we start selling again, and signs of exhaustion will be opportunities to get short again.
Keep an eye on the US Dollar Index and of course the bond yields coming out of America. Bond yields coming out of America give us a bit of an eye as to whether or not there might be demand for greenbacks, so that something that you need to be very cognizant of. All things been equal though, we have been falling for quite some time and I would anticipate a bit of follow-through.
.png "AUD/USD")