- The Australian dollar has been very choppy during the month of May, and quite frankly think June could bring more of the same.
- However, this is a currency pair, much like the EUR/USD pair, that I will be watching for a sign of where things may go with the USD overall.
- After all, we have seen the Australian dollar just simply skyrocket from the lows a couple of months ago, only to go sideways and put everybody to sleep.
- We are in a very well-defined range, and these well-defined ranges typically give us an idea as to where things are going overall.
Technical Analysis
The technical analysis for this pair is somewhat sideways over the last 5 or 6 weeks, but we had initially exploded to the upside to show signs of extreme strength in the Australian dollar, or as it turns out, extreme weakness in the US dollar after all, the Australian dollar is highly levered to the commodities markets, and perhaps more importantly, the Chinese economy, which obviously is a major buyer of Australian hard assets such as gold and iron.
At this point, I think there is a technical set up that we can be watching, with a move above the 0.65 level signifying that perhaps the Australian dollar is ready to take off toward the 0.67 level is probably accompanied by extreme weakness in the US dollar, so I would not only be trading this pair, but probably multiple other ones. Remember, a lot of what we are seeing here is reactions to the tariff situation, or over the last 5 or 6, in decision. On the other hand, if we break down below the 0.6350 level, then it’s likely that we see the US dollar strength across the board, and the Australian dollar reaching to lower level such as the 0.62 level, followed by the 0.60 level, although I do recognize that the 0.60 level is a massive undertaking for short selling.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.