The Australian dollar has broken down significantly during the week, to slice through the 0.71 handle. If you been following me here at FX Empire for some time, you know that the area between 0.70 and 0.71 is what I consider to be a “zone of influence.” This is not necessarily a support or resistance area, more like a zone. There is a lot of fighting back and forth in this general vicinity.
AUD/USD Video 19.10.20
Because of this, the market is likely to see a break down below the 0.70 level as something rather significant. The fact that we broke through an uptrend line recently and then came back to test it yet again. This is an area that will continue to offer resistance as well, so ultimately I think this is a market that probably go sideways as we have so many different things out there competing for attention and driving the possible direction of risk appetite and risk assets such as the Aussie dollar.
The US dollar has been weakening for some time, but when you look at the chart you can see that we had gotten far too ahead of ourselves. A pullback makes quite a bit of sense, but as the 0.70 level is extraordinarily important, and as a result I think that a lot of short-term tension will be paid to that level. As things stand right now, I suspect that the 0.70 level offer support while the 0.72 level offers resistance and I assume that the default situation is that we are consolidating. If we break down, then a drop to the 0.68 level could be very possible.
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This article was originally posted on FX Empire
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