AUD/USD Forecast: Aussie Sitting Just Below 0.72

(MENAFN- Daily Forex) The Australian dollar feel a bit on Tuesday as Americans came back from the Memorial Day holiday. That being said, it looks as if the 50-day EMA is exerting a certain amount of influence as well, due to the fact that the market had bounced from just below it. The 0.72 level continues to be in focus, and it is somewhat encouraging that the market recovered during the day. The question is whether or not we can break above them with any type of force?

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If we were to break down below the bottom of the candlestick for the trading session on Tuesday, that would turn it into a“handyman” candlestick, which is a very bearish formation . In that scenario, it's very likely that we would see follow-through with the Aussie targeting the 0.71 level, and then perhaps the 0.70 level after that. The 0.70 level has been historically important, but it's also worth noting that we have sliced through it recently. In other words, it's just the target at this point.

We are still very much in a downtrend, and at this point most of the US dollar selling is probably people speculating that Jerome Powell is going to be browbeaten into loosening monetary policy by Joe Biden. Quite frankly, Joe Biden is probably going to tell him to become even more aggressive with his tightening, because inflation heading into a midterm election is a recipe for disaster for the Democrats. Although the Federal Reserve is supposed to be apolitical, reality has taught us much differently.

If we can break above the 0.72 level, then it's possible that the rally“has legs.” At that point, I would anticipate that the market could aim for the 200-day EMA, which is near the 0.7266 level. A break above that would confirm an uptrend, at least from a technical standpoint, and certain algorithms would probably jump into the fray, and push the Aussie toward the 0.75 level, an area that has been important previously. At this juncture though, I am very hesitant to short the US dollar, although it's been a very nice pullback that so many traders would have looked for. Volatility continues to pick up and make trading very difficult. I just don't see that changing anytime soon.

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