The Australian dollar has fallen rather hard during the course of the week to reach down towards the 0.75 handle, an area that I think is absolutely crucial. If we break down below here, it is very possible that we could drop all the way down to the 0.72 handle, if not the 0.70 level. Australia is highly sensitive to the commodity trade which has of course got hit rather hard due to the Federal Reserve talking about tapering. However, that trade is probably a bit overdone due to the fact that the Federal Reserve is not likely to do anything for at least 18 months. While markets clearly have more of a negative twist to them, the reality is that they may turn around and recover just as quickly if somebody from the Federal Reserve comes out and says the right thing.
AUD/USD Video 21.05.21
All of that being said, if we do bounce and we could see a 200 point bounce to reenter this consolidation area. However, it is looking less likely that we will see that, so if we break down, I think it will be the obvious tray that people will start shorting rather rapidly. Quite frankly, buying this pair is going to be very difficult, so I would need to see some type of really strong and bullish candlestick on the daily chart to start playing for a bigger move to the upside. Nonetheless, this is an area that we need to watch very closely, and I do think that the next move could be rather drastic once we peel away from the 0.75 handle.
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This article was originally posted on FX Empire