If we turn around and break down below the bottom of the candlestick from Thursday, I’m not going to hesitate to buy the US dollar, but I would not necessarily do it here.

• The AUD/USD currency pair rallied a bit Friday as we continue to climb ever so slightly.
• This is an interesting candlestick and move during the day because we had formed such a massive shooting star from the Thursday session.
• At this point, the market looks as if it is stalling a bit, but it is rather impressive given the fact that the US dollar has strengthened so much against other currencies.

Resistance at 200-Day EMA

Looking at this chart, the 200-day EMA sits just above, and that could offer a little bit of resistance. The 0.72 level above there opens up the possibility of resistance as well, and it’s likely that we will see sellers come back into this market before it’s all said and done. That being said, it comes down to the bond markets and whether or not traders believe that the Federal Reserve is going to continue to tighten. It’s interesting that they don’t, because it shows just how much the credibility of the Fed has been destroyed.

The Australians are more likely than not going to tighten a bit as well, but they also have the added concerns about China slowing down. The market is highly sensitive to the Chinese economy, due to the fact that the Australians are the biggest supplier of copper and other metals to the Chinese. That being said, the market is likely to continue to see noisy behavior, and although the Aussie has been a bit of an outlier when it comes to fighting the strength of the greenback, it does not necessarily mean that I want to jump in and start buying it.

If we turn around and break down below the bottom of the candlestick from Thursday, I’m not going to hesitate to buy the US dollar, but I would not necessarily do it here. I think we would probably see the euro and the British pound fall much further, so I am more or less going to use this market right now as an indicator. However, I would also point out that if we broke above the 0.72 level, then it’s likely that we go much higher. At that point, it would be a very strong turn of events. The last couple of candlesticks have been relentless, and if you believe in the bullish flag, there is the possibility that we could go all the way to the 0.74 level.

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The fight over the next week or so could determine where the Aussie goes longer-term.

• The AUD/USD currency pair has rallied significantly again during the training session on Thursday to reach the 200 Day EMA.
• The 200-Day EMA is offering a bit of dynamic resistance, and at this point, it’ll be interesting to see how Friday turns out.
• We have seen a major move higher by the Aussie dollar, but it will be the follow-through and what happens heading into the weekend that will truly give us a bit of an idea as to where we are going.

If we break above the 200-Day EMA, then it’s likely that we could look to the 0.73 level. The 0.73 level being broken to the upside could be a bit of a trend change, but right now I think that we have a battle setting up in the bond market that is going to continue to cause a lot of volatility. Bond markets continue to set up the next trade, and right now it’s worth noting that interest rates have dropped, but if they turn around and rally in the United States, that will send this pair lower.

The interest rates falling could send this market much higher, perhaps ready to head into a bullish move. That being said, the market is likely to continue to see a lot of volatility regardless, and if we did break above there, it could send the Aussie dollar looking to the 0.78 level. This could also be influenced by the commodity markets, and maybe even gold. Regardless, I think the fight over the next week or so could determine where the Aussie goes longer-term.

Another thing to worry about at this point is going to be the bank runs that we see in China, and therefore any damage to the mainland Chinese economy. If that economy starts to fail, it will have a huge influence on the Australian dollar and could send this currency much lower. In general, although this pair has been very bullish, it’s worth noting that the rest of the major currencies aren’t necessarily as strong against the greenback, so you will have to be very cognizant of the fact that typically all markets come back to correlations again. In other words, although the Australian dollar is probably the strongest currency right now against the US dollar, it’s not necessarily something that I am willing to jump in right away.

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I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing.

• The AUD/USD currency pair rallied significantly on Wednesday as the CPI number came out much cooler than anticipated.
• Because of this, the idea is that the Federal Reserve can start to pivot a bit, but it’s very unlikely to happen. After all, inflation is 3 ½ times what the Federal Reserve looks for, so they are going to continue to be very tight.

Strong Candlestick

The size of the candlestick is very strong, and it does suggest that we have a little further to go. At this point, the market looks as if it is going to threaten the 200-day EMA, as it is now below the 0.72 level and grinding lower. I think that could be a bit of difficulty trying to hang onto, and I think it’s probably only going to offer a lot of trouble. Signs of exhaustion will get sold into, due to the fact that the US dollar continues to be highly sought after in general, especially as we have a major recession ahead of us.

If we do break above the 0.72 level, then possibly we could see this move all the way to the upside. At that point, we could see the 0.76 level. I just don’t see that happening though, and it’s likely that the market is going to run into exhaustion before we get there. If we break down below the 50-day EMA, that opens up the possibility of a drive down to the 0.69 level, which has been supported previously. Breaking below there opens up the possibility of a move to the 0.67 handle. That’s an area where we have been multiple times over the longer term, and it has offered a massive amount of support. Breaking below that level could open up a massive selloff and what would be a very negative turn of events for risk appetite overall.

I think the only thing we can count on now is going to be a lot of noisy behavior, so you need to be cautious about your position sizing. That’s probably sage advice for just about any market right now, but the Aussie does tend to be very noisy, so that makes quite a bit of sense. The US dollar seems to be trying to recover against the euro and the British pound, so we will see what happens here.

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This is a market that I think will be choppy and difficult to put a lot of money in.

• The AUD/USD currency pair pulled back a bit from the crucial 0.70 level, as we have seen happen multiple times.
• As we wait for the CPI number to come out on Wednesday, it’s likely that we are going to see some type of bigger move.
• If the CPI number comes out hotter than anticipated, which would be the 0.5% level month over month, that could send this market reeling to the downside.

On the other hand, if we turn around a break above the 0.7050 level, then it’s probably going to be a result of the CPI number coming out cooler than anticipated. In that scenario, it’s possible that market participants may do everything they can to convince themselves that the Federal Reserve is going to loosen monetary policy. While that may take some of the aggressiveness out of the situation, the reality is that we are still very much in a downtrend, and for multiple reasons.

Commodity Markets Selling Off

When you look at commodity markets, they have been selling off in general, and that of course puts a bit of negativity into the Aussie dollar. I think given enough time, we will probably try to test the lows again, but I don’t think necessarily that it is a market that we should be buying. However, there are a couple of levels above that could cost some issues anyway. Not the least of which would be the 200-day EMA which is sitting just below the 0.72 level.

If we turn around and start falling apart, the 0.69 level is an area where I would see a lot of support, and if we break down below that level then we will almost certainly try to get down to the low at 0.67. Keep in mind that there is a lot of economic and inflationary noise out there that is going to cause this market to be choppy at best. The 50 Day EMA is right in the middle of the consolidation area that we are in right now, so that will attract a certain amount of algorithmic trading as well. This is a market that I think will be choppy and difficult to put a lot of money in. However, we should get a bit more clarity by the end of the Wednesday session, so analysis tomorrow will probably be much more convincing.

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This is a market that I think continues to show negativity, so I like the idea of shorting signs of exhaustion if we get those.

• The AUD/USD currency pair fell significantly Friday as interest rates in America started to spike again.
• The jobs number came out much hotter than anticipated, so people are starting to assume that the Federal Reserve will have to continue to be very tight.
• After all, the Federal Reserve has been trying to tell everybody over the past week that they are nowhere near pivoting, and the US dollar shrinking was a bit of a stretch.

Technical Analysis

At this point, the market is threatening to 0.69 level, which is an area that I think a lot of people pay close attention to. We did pierce that level at one point, but then turned around to rally and break above it. This does not suggest to me that the market is ready to turn around for a bigger move, just that we are struggling a bit at this point. If we can break down below the bottom of the candlestick, then I think that it’s likely that the Aussie will go looking to the 0.68 level. After that, we could open up a move down to the 0.67 level. If we were to break down below the 0.67 level, then that would be a major turnaround in the market, and perhaps open up a rush of selling.

On the other hand, if we were to rally at this point, the 50-day EMA just above is going to cause a little bit of technical resistance, and then possibly the 0.70 level. The 0.70 level is a major area of noise all the way to the 0.7050 level. If we were to break above the 0.7050 level, then it’s possible that we could go much higher. If we break above there, then we would be looking at a potential move to the 200-day EMA.

This is a market that I think continues to show negativity, so I like the idea of shorting signs of exhaustion if we get those. At this point in time, it’s likely that we will see the US dollar strengthen given enough time. However, I think it continues to be very noisy to say the least, so it’s likely that we will have plenty of short-term selling opportunities in what is going to be a longer-term move.

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As long as traders on Wall Street believe that they can get cheap or free money, get a rally.

• The AUD/USD currency pair has been back and forth during most of the session on Thursday as we have the Non-Farm Payroll numbers coming out for Friday.
• This suggests that we are more likely than not going to see some type of resolution finally.
• The 0.70 level above is the beginning of significant resistance, so it is most likely going to be in the area that we need to pay close attention to. If we were to break through that area, it would set quite a precedence in this market.

Break Above 0.7050

Breaking above 0.7050 level could kick off a longer-term rally in the Australian dollar, perhaps driven by the market’s desire to force the Fed to lower interest rates. The jobs number on Friday will have a major influence on where we go next, because if the jobs number comes out far too strong, then people will be worried that the Federal Reserve cannot bail out Wall Street. For the last 14 years, the Federal Reserve has served the interest of hedge funds and investment banks, but now they have to worry about inflation. Inflation running out of control is the type of thing that causes civil unrest.

It is because of this that we may be entering a new paradigm, but the end result will more likely than not be the same. In other words, I hate to say this but it’s probably back to the “bad news is good news” type of attitude that the market had for so long. If the jobs number is relatively light, it’s likely that what we have next year rally in the market because Wall Street will be convinced that they will get their sugar from Uncle Jerome. On the other hand, if the jobs number comes out far too strong, people will begin to worry that the Federal Reserve is actually serious about fighting inflation, which of course would be bad for Wall Street as markets have nothing to do with the economy.

Once you understand that it’s about monetary flow and has nothing to do with the companies involved, you begin to understand that this is a bet on Federal Reserve policy more than anything else. This is especially true with the NASDAQ 100, as it is so highly levered to the interest rate situation to begin with. As long as traders on Wall Street believe that they can get cheap or free money, get a rally.

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In general, I think this is a market that will continue to be more of a range-bound type of situation.

• The AUD/USD currency pair fell a bit Wednesday to break down below the lows of the previous candle, showing that perhaps there is still plenty of downward pressure.
• However, we have turned around in the middle of the day and have seen the market try to recover completely.
• The 50-day EMA sits just above, and of course, causes a certain amount of noise.

Keep an Eye on Commodity Markets and 10-Year Yield

The candlestick for the day is forming a bit of a hammer, and that is a bullish sign, but we are simply testing the bottom of the recent consolidation area. The market will almost certainly continue to come back into the picture and look at this through the prism of risk appetite and consolidation at the same time. After all, the Australian dollar is considered to be highly levered to commodity markets, which are highly levered to world growth. If the economy starts to enter a very rough patch, it does make a certain amount of sense that the Australian dollar could suffer as a result. Alternatively, if we start to see growth return and perhaps even stimulus, that will help the Aussie as well.

Looking at the 10-year yield helps because it tells you where the US dollar may or may not end up, which is something worth paying close attention to. Another thing worth keeping in the back of your head is the fact that the jobs report comes out on Friday, so it’s more likely than not we go sideways over the next couple of sessions until we get that vital piece of information. The fact that we could not take off in one direction or the other should not be a huge surprise at this point. That being said, I anticipate that we will grind back and forth and essentially chop it up in this tight range. I do favor the downside overall, but I also recognize that we need a catalyst to get moving.

In general, I think this is a market that will continue to be more of a range-bound type of situation, so if you are going to trade it, you need to approach it from the idea of a range-bound short-term setup until we get a break above the 0.750 level or breakdown below the lows of the session on Wednesday.

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Ultimately, volatility will continue, but I still favor the greenback.

• The AUD/USD currency pair was slammed Tuesday, being the first currency to start losing ground against the US dollar.
• This was followed by the Japanese yen, euro, and the British pound as well.
• Yields in America started to rise, and that means that the demand for the US dollar started to pick up as well.

AUD/USD Technical Analysis

The Australian dollar has broken through the 50-day EMA, and now is threatening to break down below the 0.69 level. If it can break down below the 0.69 level, it’s likely that the Aussie will go looking to the 0.68 level initially, perhaps even down to the 0.67 handle, an area that is crucial. In fact, the 0.67 level being broken to the downside would be a major turn of events, perhaps opening up a bit of a “trapdoor” against the Aussie dollar.

Keep in mind that the Australian dollar is highly sensitive to China and commodity markets. There has been a lot of noise about Nancy Pelosi going to Taipei during the session, that of course had people freak out as well. That being said, I don’t know if that’s reason enough to think that this market continues lower. At this point, I’m simply willing to look at the fact that we have been in a downtrend for a while, and momentum is to the downside still. As rates start to rise, that only adds more pressure to US dollar buying, which course has a bit of a knock-on effect here. Ultimately, it’s also worth noting that the market failed right at the 50 PIP range that I had talked about previously. The 0.70 level is the beginning of that area, and we even managed to touch the 0.7050 level during the trading session on Monday, showing that it was a perfect pullback.

The candlestick size for the Tuesday session is rather varied, but it’s not till we break down below the 0.69 level that I would be convinced that we are ready to go lower. If we do not, then it’s likely that we spend a lot of time going sideways over the next couple of days as we await the jobs number on Friday, which of course is a major catalyst for the markets in its own right. Ultimately, volatility will continue, but I still favor the greenback.

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The pair will likely keep rising as bulls target the key resistance point at 0.6930.

Bullish View

• Buy the AUD/USD pair and set a take-profit at 0.6930.
• Add a stop-loss at 0.6800.
• Timeline: 1-2 days.

Bearish View

• Set a sell-stop at 0.6830 and a take-profit at 0.6750.
• Add a stop-loss at 0.6930.

The AUD/USD pair moved sideways as focus remains on the falling commodity prices and the strong American jobs data. The pair is trading at 0.6852, which is slightly above this month’s low of 0.7760. This price is significantly lower than June’s high of 0.7288.

Hawkish Fed Priced In

The AUD/USD pair has been in a consolidation mode in the past few weeks as investors continue watching the actions by the Reserve Bank of Australia (RBA) and the Federal Reserve.

In its meeting this month, the RBA decided to hike interest rates by 0.50% after delivering a similar one in the previous month. The bank has now hiked rates by 125 basis points and pointed to further hikes later this year.

The Federal Reserve will have its meeting in the final week of the month. Minutes by the FOMC that were published last week revealed that the committee was inclined to deliver another 0.75% rate hike this month.

The case for another bigger hike was supported by the relatively strong economic data by the Bureau of Labor Statistics. The numbers revealed that the economy’s labor market is substantially stronger than what analysts were expecting.

The economy added over 372k jobs in June, which was better than what analysts were expecting. In the same period, wages rose by more than 5% while the unemployment rate remained unchanged at 3.6%.

Therefore, with the labor market strengthening and with inflation soaring, analysts expect that the bank will continue hiking rates this month.

The AUD/USD is also ranging as investors focus on the relationship between China and Australia. China is seriously considering removing sanctions it has placed on most Australian goods. In a meeting the Chinese and Australian foreign ministers said that they will work on rebuilding trade relations. Notably, they did not provide a timetable of how this will happen.

AUD/USD Forecast

The AUD/USD pair has been rangebound in the past few weeks. The pair has managed to move above the important resistance level at 0.6831, which was the lowest level in May. It is also attempting to move above the 50-day moving average and the standard pivot point. It is also slightly below the descending trendline shown in blue.

Therefore, the pair will likely keep rising as bulls target the key resistance point at 0.6930, which is along the first resistance of the standard pivot point.

Ultimately, I prefer the US dollar against almost all currencies, this one included.

• The AUD/USD currency pair went back and forth Wednesday
• The pair continues to dance around the crucial 0.68 level.
• It’s likely that we will end up seeing further downside pressure.
• The Australian dollar is highly levered to the commodity markets, and you need to pay attention to what’s going on in those markets to get an idea of what’s going to go on in this market.

Time to Start Shorting?

As you know, commodities have been getting slaughtered as of late, so that is not going to help the Aussie anytime soon. I believe at this point it’s likely that rallies will get sold into, especially near the 0.69 level, which is an area that has been significant support previously and should now have a bit of “market memory” attached to it. In other words, I would anticipate a lot of selling pressure. At the first signs of exhaustion near that level, I will not hesitate to start shorting the Aussie.

If we break down below the bottom of the lows over the last week, it’s likely that we will continue to see the US dollar strengthen quite drastically, driving the AUD/USD pair down to the 0.67 handle. They break down below that level and could open up even more aggressive shorting, sending this market down to the 0.65 level. Ultimately, I don’t have any interest in buying this market anytime soon as the Aussie is limp, despite the fact that there was a surprise interest rate hike from the Reserve Bank of Australia just a couple of days ago.

The 50-day EMA sits just above the 0.70 level, and I think that would be the absolute “ceiling in the trend.” Because of this, the market is likely to respect that as a very difficult barrier to overcome, and I don’t think that it will happen. However, if it did, then you would have to pay close attention to this market because I think at that point, we could go to the 0.72 level. The 0.72 level is an area that currently features the 200-day EMA, so you should pay close attention to it. Ultimately, I prefer the US dollar against almost all currencies, this one included.