The Australian dollar has been straight up in the air for some time, in a massive correction of an oversold position. The Aussie is highly levered to a lot of global growth, and although things have opened up, the reality is that there are plenty of reasons to be concerned around the world. Now that we are approaching the 0.70 level, then we have a real fight on our hands.
This is because if we break above the 0.70 level, it is likely that the rally becomes less of a correction and more of a complete trend change, something that typically will last about three years in the Forex markets. In other words, I believe that the market is overvalued, and at the very least needs come back a bit. The 200 day EMA would be a reasonable place for this market come back.
AUD/USD Video 04.06.20
However, if we break above the 0.70 level the way to play this is to wait for the pullback to retest that area. At that point, then a lot of people will be looking to cover their shorts and looking to join in the party. Having said that, it may take several days for that move to happen. The Australian dollar has been off the rails as of late, so at the very least I think we need to pullback and that is much more logical than anything else, but clearly the market is not worried about being logical anytime soon. The US dollar has gotten hammered due to a major “risk on” move, but that may be coming to an end relatively soon.
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This article was originally posted on FX Empire
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