- The AUD/USD has gone back and forth during the trading session on Friday, as the 200-Day EMA is just above and offers significant resistance.
- It’s worth noting that the 200-Day EMA has offered resistance two days in a row, so if we were to break above there, then it’s likely that the market could go looking to the 0.70 level.
- The 0.07 level of course is a large, round, psychologically significant figure, and it will attract a lot of attention.
On the other hand, if we were to break down below the bottom of the candlestick for the trading session on Friday, then we could send this market down toward the 0.66 level. At the 0.66 level, there is also the 50-Day EMA, which is an area that has been important more than once. Underneath there, then we have the 0.65 level, which was the scene of a recent breakout. You can also make an argument for a bit of the “raising wedge” forming in this market, which offers the possibility of a bearish sign.
Keep Your Eye on Position Sizing
A breakdown below the 50-Day EMA would have a major negative influence on this market, but it would also more likely than not end up being a situation where we would see a huge “risk off” type of market overall. After all, if the US dollar continues to strengthen, then it tends to hurt a lot of risk assets, the Australian dollar included. Beyond that, you should also keep in mind that the Australian dollar highly levered to the commodities markets, and then the Asian markets. The Chinese lockdowns continuum obviously would cause a lot of problems for Australia as China is the most important Australian market.
I think as we get closer to the end of the year, the volume is going to be a major problem, and that of course could cause erratic movements. Ultimately, I think you are going to see a lot of noisy behavior, and therefore you need to keep an eye on your position sizing because as the year ends, the moves will take less noise or headlines to get things moving. With that, you are going to have to be very cautious, and it’s probably worth noting that we are in an area that previously has been very noisy in the past.
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