Originally published by AxiTrader
Tenuous is not a word I use often when talking about currencies or other markets. But I thought it apt this morning given the Australian dollar's tight 36 point range to kick off the week, the inside day Monday represents, and the fact that that the 200-day moving average continues to loom large over the AUDUSD at the moment.
Nothing really happened in the past 24 hours other than the US dollar weakened, risk appetite went even better bid, iron ore hit a 3 month high, copper stayed strong, base metals did well - and the Aussie is up just 0.27% at 0.7665.
I'm sure you can fell the irony dripping off the above paragraph. And it is because of the Aussie's inability to really grasp these positives and push up to, let alone through, the 200 day moving average that I sounded the warning by using the word tenuous.
Of course the reality is is that in this end of year and holiday period the likelihood of new - and large - positions being instituted is remote. That means the recent trends of Aussie and US dollar weakness are more likely to persist than materially shift direction.
And that is why the 200 day moving average is so important for the Aussie and for traders. A break above the 0.7691/92 region where the 200 day moving average sits would for many traders be a material shift.
So for the moment that remains the big level to watch topside with the 0.7605/15 support below.
Looking at the charts now and the up day, down day, up day leave the impression of indecisiveness near this resistance. A break of the 200-day moving average could easily see a run for the 38.2% retracement level of the fall from 81 cents to the recent low which comes in at 0.7731.
I'd expect that level to hold for the moment.
Looking at the three on the downside perhaps 0.7625/27 is actually the level to watch. It's the bottom of this 3-bar setup and in many ways as much the key to the next move as the 200 day moving average lurking above.
And whichever way it breaks - up or down - given thin markets a quick 40 or 50 points could be in the offing.
Could the RBA minutes be the catalyst for that break? Unlikely, but possible.
Here's the chart:
Have a great day's trading.