The AUDUSD has taken full advantage of the latest risk-on rally.
Since the March selloff that reached 0.5500, the Australian dollar has clawed back all 1,500 pips it lost.
It’s been an impressive rally, for sure.
But this latest move above 0.6670 doesn’t feel right to me.
It’s no coincidence that all three moves started on June 1st.
However, a gut feel about something doesn’t constitute a trading edge.
To get a better sense of where this market is headed, I need to see how AUDUSD reacts to the 0.6670 area.
That’s going to be the hinge for the pair over the coming days and weeks.
The longer the price remains above 0.6670 on a daily closing basis, the more likely it is that AUDUSD is about to move even higher.
Alternatively, if we see the Australian dollar give up 0.6670 as support, I’ll be interested in shorting the pair for a move to 0.6460 and perhaps 0.6280.
Keep an eye on the next two weeks in June, though.
As I’ve mentioned with other pairs like NZDUSD and CADJPY, June’s closing price should be telling.
But we might not have to wait that long.
Any daily and especially weekly close below 0.6670 would be an early warning sign of capitulation.
It would also signal that the June rally was, in fact, a bull trap.
On the flip side, a convincing bounce from 0.6670 followed by a June close above it would keep the rally intact.