The Australian dollar has had a rough trading session on Tuesday, as volume came back into the market. Most professional traders and large trading desks were not involved in the market on Monday, so Tuesday gave us the first chance to see what real volume might do to the market.
Early during the trading session, we started to see quite a bit of “risk off trading”, and a general run to the US dollar. Of particular note was that the Chinese Caixin Manufacturing PMI number coming out at 49, showing signs of economic shrinkage, Australia was hit rather hard as the Australians biggest trading partner is China.
From a technical analysis standpoint, the market is currently between the 50-Day EMA underneath, near the 0.6650 level. The 200-Day EMA sits above, right around the 0.6833 level. Price action has been between these moving averages for a few weeks now, and it is worth noting that the truly large candlesticks have both been negative, suggesting that perhaps the Australian dollar may end up finding selling pressure as more traders come back to work. This could be especially true on Friday, as the jobs number will have a major influence on what people expect the Federal Reserve to do.
The market topped out at the roughly 50% Fibonacci level and has not looked quite right since doing so. The MACD is starting to drift lower, showing that we are losing a lot of momentum, therefore it’s possible that a lot of the interest in the Australian dollar is waning. The market opening up to the downside could very well see the Australian dollar trade at 0.65, an area that had been important multiple times in the past. However, it’s very likely that support level will be broken, and the Aussie could continue to go much lower in that scenario.
Alternatively, if the market were to break above the 0.6950 level, then the 0.70 level will be attacked, and then eventually the Aussie could very well go looking to reach the 61.8% Fibonacci level, closer to the 0.71 level. The rest of the week more likely than not will be choppy, but it is becoming increasingly apparent that the sellers are much quicker to enter the market than the buyers.
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