Potential signal:
- I am a buyer of the AUD/USD pair if we close on a daily candlestick above the 0.6550 level.
- I would have a stop loss at the 0.6450 level, aiming for the 0.6725 level.
The Australian dollar initially did start falling during the trading session on Tuesday but then turned around to show signs of life again. The 0.6550 level above is a significant resistance barrier, and I think at this point in time we are just simply waiting for the CPI numbers to come out in order to determine whether or not we are ready to go higher. If we were to break above the 0.6550 level, it opens up the possibility of a move to the 0.67 level.
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On the other hand, if we were to break down below the bottom of the candlestick for the Tuesday session, that could open up a move down to the 200 Day EMA, which is near the 0.6450 level. The 200 Day EMA is very important, and we are getting close to the 50 Day EMA breaking above there. This would kick off the so-called “golden cross”, which is a longer-term bullish indicator for trend traders.
Potential Breakout?
I think the CPI numbers on Wednesday could be a big move for this pair, and if we can continue to go higher from here, we could get a significant breakout, especially if we have the US dollar shrinking against other currencies as well. The Australian dollar is a little bit of an outlier in the sense that the Australian currency is a direct beneficiary or victim of the Chinese economy, depending on what’s going on in the mainland. Recently, we’ve had the Americans and the Chinese talking, so that could be another reason to think that this pair goes higher, but we don’t have the news yet to send this market higher.
If we do break down, I don’t necessarily think that the Australian dollar is going to fall apart, rather I think we would just have a situation where the Australian dollar continues to consolidate. However, I believe that this is a situation where given enough time, we could very well see a nice longer term trade to the upside, but we need a few things the lineup first.
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