It’s been a while since I commented on the AUDUSD.
But that doesn’t mean I haven’t been watching it.
I track all of the major currency pairs, and I’m especially interested in them now given the increase in volatility.
I certainly don’t want to be stuck in an illiquid cross when volatility strikes.
Look no further than the recent 1,000 pip daily swings from a cross like the GBPAUD.
I’ve also been more interested in the NZDUSD than the AUDUSD.
In my opinion, the New Zealand dollar technicals are superior to the Australian dollar in every way.
That doesn’t mean the AUDUSD isn’t favorable, though.
And much like its New Zealand counterpart, the AUDUSD is retracing its footsteps following the March selloff.
That’s a good thing for those who share a bearish outlook.
If you ask me, the only real play here is to sell strength.
Could the AUDUSD climb higher from current levels?
Of course, but the reward isn’t worth the risk.
If you seek asymmetric returns as I do, then the only option is to play this as a correction within the broader downtrend.
With that in mind, here’s what I’m watching:
Last Wednesday’s session sold off hard from the 0.6450 area, which now becomes the “hinge” for higher or lower prices.
If the AUDUSD recovers 0.6450 on a daily closing basis, we could see prices push higher into 0.6670.
On the other hand, sub 0.6450 prices leave the AUDUSD vulnerable where a close below rising wedge support near 0.6330 would attract sellers.
A break lower would expose 0.6200, followed by 0.6000 and 0.5730.
Always assume consolidation will last longer than you expect.
That will help keep your initial position sizes in check, and also keep you sane when a market stays buoyant longer than they probably should.