There are so many problems around the world right now that is difficult to bet against the US dollar, but then again, at the same time it is difficult to bet against commodities.
The Australian dollar went back and forth on Monday, struggling with the 0.75 level yet again. This is an area that has been difficult to overcome, and as a result, it would not be a huge surprise to see a little bit of a pullback. The shape of the candlestick is somewhat neutral, but it is worth noting that we have had a significant move in both directions, meaning that there is a lot of volatility.
If we break down below the bottom of the candlestick, then I think it is possible that we go looking towards the 0.74 handle underneath. That is an area that has been resistance previously, so I do think that it could end up being support on a pullback. On the other hand, if we were to break above the top of the candlestick, we could go looking towards the 0.76 level above. At that point, I would anticipate that the Australian dollar would go much higher, as it will have been completely broken out.
We are currently at an area that has been very difficult more than once, so I think we are entering a potentially choppy part of the chart, at least until we make a bigger move. If we do get an impulsive candlestick, then it is possible that we could follow that, but until then I think we have a significant amount of noise in this area to continue causing issues.
Keep in mind that the US dollar has strengthened against many other currencies, so it does make sense that perhaps it would do so here. However, the recovery late during the day on Monday was rather impressive and should not be overlooked. Furthermore, the Australian dollar is highly levered to the commodities markets, which of course has been very strong. As long as that is the case, it is possible that we could see this market break out, but clearly, we have gotten far ahead of ourselves as of late, so at the very least a pullback could make sense. That being said, the markets have been very noisy, to say the least, and I think they will continue to be so. There are so many problems around the world right now that is difficult to bet against the US dollar, but then again, at the same time it is difficult to bet against commodities.