I’ve been bearish on the Australian dollar for quite some time. Even through the 2016 relief rally I never bought into the idea that the pair was gearing up for a huge run like some have suggested.
Of course, there’s still plenty of time for the market to prove me wrong. But recent developments indicate that staying bearish is likely the right course of action.
This week began with an aggressive move from the Aussie even as the US dollar held its ground across the board. By the end of Wednesday’s session the pair had clawed its way above six-month trend line resistance, hinting at a bullish continuation.
Luckily, my bearish view which is significantly influenced by the five-year downtrend kept me on the sidelines. I had no interest in buying the pair given the longer-term bearish momentum and my broader view on risk assets.
In a sudden change of events, Thursday’s selling gave way to an impressive 113 pip bearish engulfing candle. And because the pair closed comfortably below the 0.7645 handle, I was immediately interested in shorting it on a retest as new resistance.
Here is my post from inside of the member’s area just 14 hours ago.
Yes, that’s a “Supertrader” avatar that one of my members drew for me and I’m very proud of it.
Today’s session is far from over, but so far the high is 0.7650, just five pips above the level I mentioned.
So where to next?
The first area where the pair is likely to encounter support is near 0.7565. But keep in mind that a more impactful level is channel support that extends from the current 2016 low. That area comes in around 0.7550.
A close below channel support would signal a continuation of the broader downtrend and open up the September low at 0.7440. As mentioned earlier, critical resistance comes in at 0.7645.
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