The Australian dollar initially tried to rally during the course of the trading week to reach down towards the 0.70 level. The 0.70 level is a large, round, psychologically significant figure, and therefore the market is going to be paying attention to that. Furthermore, it was an area where we had seen support previously, so that of course means something as well. At this point, I think it is probably only a matter of time before we have to test this, but it is worth noting that the market is closing at the very lows of the candlestick, so that does suggest there is going to be a bit of follow-through.
AUD/USD Video 06.12.21
I am going to use the daily chart to enter, and because of that if we get a daily close below the 0.70 level, then I will take a shot at shorting this market. At that point, with could go looking towards the 0.68 level underneath. On the other hand, if we turn around, it could be a nice buying opportunity, but I cannot help but notice that it looks like we just broke down through the bottom of a massive head and shoulders.
The “measured move” of that head and shoulders could have this market dropping down to the 0.60 level, which would probably be a longer-term major “risk off” scenario. I do think that the market needs to make a longer-term decision soon, and it is worth noting that the US dollar continues to strengthen. In general, this is a market that I think continues to be very noisy, but you should also pay close attention to the fact that the Aussie is highly levered to the Chinese situation as well.
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This article was originally posted on FX Empire
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