As soon as we get a daily close out of this range, I am willing to start buying or selling, depending on which direction we go.
The Aussie dollar has gone back and forth during the trading session on Thursday as the 50 day EMA continues offer short-term resistance. That being said, we are dense back in the middle of a significant consolidation area between 0.74 and 0.73. This of course sets up for a potentially interesting trade scenario.
As soon as we get a daily close out of this range, I am willing to start buying or selling, depending on which direction we go. Breaking down below the 0.73 level, then it would be a continuation of the massive selloff that we had seen and would also validate the 200 day EMA offering resistance like we had seen over the last couple of sessions. On the other hand, if we were to turn around a break above the 0.74 level, I think at that point the market probably goes looking towards the 200 day EMA. This of course is an area that will attract a lot of attention, and I would also argue that there is probably resistance at the 0.75 handle. For a bigger move to happen we need to break above both of those areas.
Keep in mind that the Australian dollar is highly sensitive to risk appetite, so you need to pay very close attention to it. Not only will external markets influence on where the Aussie tends to go, but the Aussie can give you a heads up as to where you should be trading other market such as commodities. Granted, there is the influence of the US dollar here, and that of course is somewhat all over the place. Because of this, you need to be very cautious about position size, and this is part of why I am waiting to break out of this rectangle of support and resistance on a daily close before putting money to work. In other words, this is probably a trade for Monday, not necessarily Friday, as a lot of traders will have to make a longer-term decision as they go home for the weekend. I would anticipate that we probably see some choppy and erratic behavior, but the last couple of days shows just how tenuous this particular area is going to be. If we do break down, we could go all the way down to the 0.71 level again.