With the jobs number coming out on Friday, I do think that we will get some type of decisive move, but it may not be until then.
The Australian dollar rallied quite significantly on Tuesday to reach above the 50-day EMA. At this point, it looks as if the Aussie is trying to completely wipe out all of the losses from the previous session, but it is worth noting that we have not broken above the top of the nasty candlestick from the Monday session. If we were to break above the top of that area, then it will make a serious challenge to break out of what has been extraordinarily troublesome resistance.
That resistance is at the 0.7275 handle and has been tested multiple times. If we were to break above that level, then obviously it would be very bullish for the Aussie dollar as we would go looking towards the 200 day EMA at the 0.7351 level, and perhaps even higher than that to go looking towards the 0.75 handle. The market has the possibility of doing all of that, but obviously it would need some type of catalyst.
The jobs number coming out on Friday could have its say as to where we go with the greenback, but you should also pay attention to hard commodities such as copper, aluminum, and iron. Australia is a major exporter of these hard commodities, and the currency and economy are heavily influenced by this trade. Beyond that, mainland China has a lot of influence on what happens with that Australian economy as well, so we need to keep an eye on what is going on over there. Recently, a lot of the noise coming out of China has not been very positive, and that does not help this market at all.
If we were to turn around and break down below the bottom of the lows of both Monday and Tuesday, that could open up a bit of a “trapdoor effect” in this market, sending it down towards the 0.71 handle. With the jobs number coming out on Friday, I do think that we will get some type of decisive move, but it may not be until then. Regardless, we have a significant amount of support and resistance at various levels that we can keep an eye on, and then trade the market accordingly. You can also make an argument that we are forming some type of rising wedge, although that is one of my least favorite patterns.
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