The Australian dollar has found itself on the back foot over the last couple of days, as the 0.70 level has offered a significant amount of resistance. It’s also worth noting that during the day on Wednesday when it did spike to its highs, it fell just shy of the 61.8% Fibonacci level, an area that is quite often wants to buy traders around the world.
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It’s also worth noting that the candlestick from the Thursday session pierced the top of the Bollinger Band indicator, suggesting that it was a little overdone to begin with. In fact, you could make a solid argument that the selloff in the US dollar has been overdone recently, but now Australian dollar traders will have to deal with the 0.6850 area, which was a previous resistance barrier, as well as essentially where the 20 SMA resides, the middle level of the Bollinger Band overlay.
The MACD indicator is starting to roll over slightly, showing signs of weakness for the first time in a couple of weeks, but has not fired off a signal quite yet.
At this point, if the Aussie dollar makes a fresh, new high, it’s very likely that it could go higher for several hundred pips. On the other hand, if it breaks down below the middle line of the Bollinger Band, it could go hunting for the 0.67 level initially, perhaps even lower. Keep in mind that the Australian dollar is highly levered to Asia and the commodity markets, so make sure to keep an eye on gold, copper, and other metals markets as China is in the midst of reopening.
If there is more of a general “risk off feeling” around the world, it’s typically good for the US dollar, and you could see this pair reverse. Keep an eye on stock markets and general risk appetite for assets, because as they typically rise, the USD will typically fall. This correlation is not exact, nor is it written in stone, but it is a general guideline as to how the flow of money works.
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