Rallies After Initially Gapping Lower on M

If we do break above the 50-Day EMA, it’s likely that the market will go looking to the 0.67 level bomb, which is a large, round, psychologically significant figure, and an area where we had seen a lot of support previously. 

The AUD/USD has gapped lower during the trading session on Monday, as it looks like the fear trade started back up, but having said that, we have turned around to show signs of life again. At this point, the market looks as if it is trying to reach the 0.65 level, which of course is a large, round, psychologically significant figure.

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Furthermore, the market has seen a lot of negativities over the long-term, but it’s likely that we would see the market bounce occasionally, and that’s essentially what’s going on right now. Given enough time, I believe that the Aussie rolls over, mainly because the Federal Reserve remains tight with its monetary policy, while the Australians remain a bit iffy at best. After all, the Reserve Bank of Australia recently raised interest rates much less than originally anticipated. Because of this, it’s likely that we continue to see a lot of difficulties but given enough time I think we probably have the weight of the market take over again. The 50-Day EMA sits just above the 0.65 level, so I do think it’s likely that we will continue to see the 0.65 level offer a bit of a “soft ceiling.”

Market Likely to Fall to the 0.60 Level

  • If we do break above the 50-Day EMA, it’s likely that the market will go looking to the 0.67 level bomb, which is a large, round, psychologically significant figure, and an area where we had seen a lot of support previously.
  • That level of support had been important for several years, so it’s not a huge surprise to see that perhaps traders will continue to look at this as an area that will have a certain amount of “market memory” attached to it.

On the downside, if we can break down below the 0.6250 level, it’s likely that the market then opens a move down to the 0.60 level. That is obviously an area that will attract a lot of attention, as it is psychologically important, and extremely low. However, if the Federal Reserve continues to be very tight and the RBA has to worry about a housing crisis in Australia, it’s a very real possibility that this does in fact happen. How long it takes to get there might be a completely different question, but at this point it is still very possible.

AUD/USD

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