The Australian dollar broke significantly lower on Monday to break down below the 0.70 level. The 0.70 level is an area that has been massive support multiple times, so it is not a huge surprise to see that we tested that level again. The market is getting ready to attempt a major breakdown, and if we do continue to go lower, it is likely that we will see an acceleration to the downside.
Any rally at this point will more than likely offer a lot of resistance, meaning that at the first signs of exhaustion we will probably have sellers jumping into the market. If we get a large wick to the upside after a bounce, then I will be all over this to the downside. If we break down below the 0.6950 level, it is likely that the market will go looking to reach the 0.68 level. That is an area that has a lot of noise just above it, so I do think that it will continue to be very choppy in this area, but I think that it is an area that will certainly be tested.
Keep in mind the Australian dollar is highly sensitive to commodities, so pay close attention to what is going on in the various markets to get a feel for what could happen with the Aussie. Furthermore, the US dollar has been strengthening quite drastically, and I think that will continue to be the case. Ultimately, the market looks horrible, and I think it is only a matter of time before we see a complete breakdown. There is nothing good looking about risk appetite at this point, and that will continue to favor the downside.
It is not until we break above the 0.7265 level that I would consider going long, which would break above the highs of the last couple of candlesticks. At that point, enough inertia would have been thrown into this market to the upside to make this a viable trade. Nonetheless, this is a market that seems as if it is in the midst of breaking down, so it is only a matter of time before that happens from what I can see. Fading short-term rallies will continue to be an opportunity.
