The Australian dollar has pulled back a bit during the trading session on Friday, as it looks like we are going to be happy to simply go back and forth in what could potentially be a bullish flag being built. The Australian dollar has been a major beneficiary of the perceived “reflation trade”, as it is highly levered to commodities that are quite often used when stimulus takes over. The biggest problem at this point though of course is the fact that there is a lot of questions as to how big the stimulus will be, because quite frankly the $1.9 trillion worth of stimulus is no longer a “slam dunk” as several senators have stepped out and suggested that they are not going to vote for something that big, and quite frankly are not necessarily in a huge rush to make anything happen. The idea of a lack of stimulus will more than likely have money flowing back into the US dollar.
AUD/USD Video 25.01.21
That being said, there will be stimulus given enough time, perhaps reaching down towards the 50 day EMA. The 0.75 level also offers a significant amount of support, so if we did pullback, I think that is about as far as it goes. On the other hand, if we turn around a break above the top of the bullish flag that is being built, that is obviously a bullish sign and it should open up the door for a move towards the 0.80 level above which looms large from a psychological and structural standpoint. If we broke down below the 0.75 handle, it is possible we may have further to go but at this point I am leaving that as goes a “I will cross that bridge when I get to it” type of scenario.
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This article was originally posted on FX Empire