I will begin a short position at the first signs of a breakdown, but I will do so with a very small position initially.
The shape of the candlestick is one of exhaustion, so if we break down below the bottom of the candlestick, then I think it’s likely we can look into the 0.68 handle. Keep in mind that we recently bounce from the 0.67 level, which is a major area of support going back quite some time. Because of this, it’s not a huge surprise to see that we have bounced, but if we were to break down below that level, it’s likely that we go much lower. In fact, it’s almost like a “trapdoor” opening up and allowing the market to plunge quite rapidly.
If we turn around and rally, a move above the 0.70 level will capture a lot of attention. After that, the market could go looking to the 0.72 level, but that almost certainly would have something to do with the Federal Reserve meeting on Wednesday, and perhaps a bit of a dovish surprise. I don’t see that happening, but I suppose anything is possible and you need to follow price action more than anything else.
Looking at this chart, we are still very much in a downtrend, so I still favor shorting. The US dollar will continue to be like a wrecking ball against almost everything, but that does not mean that we will go straight down forever. The market will continue to see a lot of volatility, but I think you could probably say that for just about any asset, not just the Australian dollar.
I will begin a short position at the first signs of a breakdown, but I will do so with a very small position initially. As the market starts to go in my direction, I will start to add yet again. However, it’s possible that we may not see anything happen between now and the Fed meeting.