The Australian dollar rallied a bit during the trading session on Monday to kick off the week with a certain amount of strength, due to the Chinese equities starting off the week rather strong. This was based upon statements coming out of the government, so read into that which you will but at the end of the day the Australian dollar is overly sensitive to China in general. With that, if China does better, so does the Aussie dollar.
AUD/USD Video 07.07.20
Having said that, the area between 0.70 and 0.71 is extraordinarily resistive, so it is not like we are simply going to slice right through there. With that, I would assume that there will be multiple pullbacks before we get some type of major breakout, but if we do manage to get above 0.71, it is likely that the market will become more of a “buy-and-hold” type of rally. After all, that would wipe out a major sell off in this market, and thereby show extreme amounts of strength.
If we do pull back, anticipate that the 0.68 level should be supportive, because it has proven itself to be so several times over the last couple of weeks. I think at this point it is difficult to get overly excited about some risk assets like the Aussie, because there are so many different things going on at the same time that could cause absolute chaos. With that, if I were forced to make a trade here, I would assume that a pullback is coming, and a breakout seems very unlikely. This does not mean that you cannot buy the Australian dollar, just that you are playing with fire all the way up here.
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This article was originally posted on FX Empire
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