- The Aussie dollar initially gapped lower at the open in Asia on Monday but has spent the majority of time since then trying to claw its way back to the upside.
- There was a little bit of a negative reaction to the announcements of aluminum and steel tariffs by the United States.
- But I think people have finally come to the conclusion that it's not the end of the world.
Because of this, the market rallied and now even got close to challenging the 0.63 level. The 0.63 level is an area that has been very difficult to overcome, but if it does get broken to the upside, then the 0.635 zero level could be targeted. Keep in mind that the 50 day EMA is in the same neighborhood as well.
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So that puts a little bit of a ceiling in the market if you will. If we break down from here the 0.62 level is an area that I would be watching closely as it has been important multiple times and then after that you could be looking at a move to the 0.61 level. Remember that the Australian dollar is highly levered to the Chinese economy and quite frankly the Chinese economy isn't doing that well and with that being the number one destination for hard assets coming out of Australia happens to be China.
Where Next?
Ultimately, this is a scenario where I think you see a lot of sideways action as we try to determine what to do next. But I think the real key is whether or not we can get a daily close above 0.6350, then you might have a deeper correction of the massive downtrend. But as things stand right now, I look at this as a fade the rally type of market, much like you see in the Euro against the US dollar or the British pound against the US dollar.
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