The Aussie is looking a bit exhausted after the action on Tuesday, reaching towards the 50 day EMA before pulling back to form something akin to a shooting star. This is a marketplace that has got ahead of itself as we head towards the G 20, perhaps on dreams of the United States and China working things out. Anybody who’s been following the headlines knows better than that, and perhaps we are starting to see that in this currency pair.
Looking at this chart, it’s obvious that the 0.70 level above is resistance, as we have pulled back from there. At this point, the 0.7025 level is very likely to continue to offer selling pressure. If we break down below the bottom of the candlestick for Tuesday, that opens up the door for a return to the 0.65 zero level, a trade I am more than willing to take as people begin to take risk off heading towards the weekend.
Beyond that, we also have concerns about Chinese banks which will cause a lot of issues when it comes to demand for Australian hard commodities, and of course the Federal Reserve speakers that came out on Tuesday suggested that perhaps the market was a little ahead of itself when it comes to the dovish attitudes of the central bank. Because of this, there is probably more of a “sell the rallies” type of situation in this market, at least not until we get some type of change in the overall situation in China. This isn’t to say that we will break down below the 0.68 level, just that we will probably head towards that general vicinity. The real fireworks could start next week, but I believe that both the Americans and the Chinese will walk a tight rope to keep the market somewhat stabilized. That doesn’t mean that it will suddenly a bullish, just that it probably won’t bow down.