- During the trading session on Tuesday, we have seen the Australian dollar rally rather significantly during the early hours, only to see a turnaround and fall apart.
- At this point in time, the market is likely to continue to respect the 0.64 level, based on what we have seen over the last 24 hours.
- We got here too quickly, and in those who have been chasing the Australian dollar the last 24 hours could very well end up paying the price.
Technical Analysis
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This massive “V bottom” is absolutely ridiculous. It’s not to say that we can’t go higher from here, but to be buying at this level, you are now collecting the losses that you so desperately ask for. The shooting star of course is a sign of exhaustion, and at this point, when you look at this chart you have to assume that we are at least going to slow down. The 0.64 level was major resistance multiple times, and of course it is backed up by the 200 Day EMA as well. However, the 0.62 level underneath has been significant support, so it’s not as if I expect the Australian dollar to suddenly collapse, just that I think that we may end up in the same trading range we had been in during the previous couple of months.
Keep in mind that Australia is of course highly sensitive to whatever is going on in China, and it’s obvious that China is looking to expand the tariff war after last night, and its refusal to allow Chinese airlines to buy Boeing aircraft. There are other actions going on as well, and one would have to assume that it’s only a matter of time before Donald Trump does something else in reaction. The trade tariff war between the United States and China look like it is nowhere near ending, and quite frankly this is something that’s been brewing for years. The difference of course is that the United States finally took action. This will end poorly, these things generally do, but the question now is will Australia be collateral damage? I fully anticipate that it will be.
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