Gives Up an Early Gain

This is a market that I think continues to see plenty of noisy behavior.

The AUD/USD has initially rallied during the trading session to show signs of bullish pressure, breaking above the 0.69 level. However, we have given back quite a bit of the gain, and now we are warming and inverted hammer. If we break down below the bottom of the inverted hammer, that is a very negative turn of events, opening up the possibility of negativity.

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In that scenario, it is very likely that the Aussie goes looking to the 0.67 level, which is an area that we had bounced from previously. This is a market that if we break down below that level, then it’s likely that the market falls apart and then goes down to the 0.65 handle. Keep in mind that the Australian dollar is highly levered to the Chinese economy, so therefore you need to pay attention to everything that’s going on in the Chinese mainland. There are a lot of concerns right now and therefore I think that you could see quite a bit of volatility.

Traders do not like volatility

• The 50 Day EMA above offers quite a bit of resistance, and currently sitting at the 0.6970 level.
• This is a market that given enough time should see quite a bit of selling pressure, and I think that Monday was the first shot across the bow.
• If we do rally from here, the 0.70 level should be a significant resistance barrier, and then we have the 200-Day EMA near the 0.7120 level after that.

In other words, this is a market that I think continues to see plenty of noisy behavior, and that typically means lower prices. Volatility is something that traders and investors do not like, typically leading to further selling pressure.

It is not until we break above the 200 Day EMA that I would consider buying this market, which would be a real stretch at this point. If we do break above there, then it’s perhaps time to start thinking about a trend change. We are light years from that happening so it’s more likely than not going to be a situation where we rallies as selling opportunities at the first sign of exhaustion, and you can also take a look at the Monday candlestick and say perhaps that’s exactly what we are seeing over the last 24 hours.

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