Aussie dollar running into resistance

While the Australian dollar has been very bullish over the last week or so, there are several things that it is going to struggle within the next couple of days. For example, the Bollinger Band indicator is being stretched and tested at the very top of the range. This typically means that the market is starting to get a little overbought, and as a result you could see a bit of a reversion to the mean. Beyond that, we also have the 61.8% Fibonacci retracement level in the neighborhood, and although the candlestick on Friday has been a little bit bullish, the Shooting Star from Thursday is of course very negative.

The 0.69 level of course is right here as well and the large, round, psychological significance of the figure should not be ignored either. Beyond that, the 200 day EMA above is going to offer resistance, so at this point even if the Australian dollar was to continue rallying over the longer term, it does look as if the market is ready to pull back at least in the short term. That pullback could lead for a move down to the 0.68 handle.

Alternately, if the market can break above the 200 day EMA, then we have an argument for a move to the 100% Fibonacci retracement level, meaning that the Australian dollar could very well find itself reaching towards the 0.71 level. That won’t be easy, and even if we do pullback that doesn’t mean that we won’t do it in the next couple of weeks. That being said, it does look a little bit overextended so therefore a pullback makes the most sense over the next couple of daily candles. Ultimately, the market looks as if it is trying to form a larger base, but still needs to build up the necessary inertia.