The Australian dollar has rallied a bit during the trading session on Wednesday as we continue to see more of a grind to the upside. The Aussie of course is part of the “reflation trade”, and therefore I believe that the Australian dollar probably continues to be bullish more than anything else, but at this point in time I think that what we are looking at is a little bit of exhaustion, perhaps the market will try to build a bullish flag here.
This does not mean that I am willing to sell this market, just that I am not expecting a lot over the next few sessions.
To the upside, I believe that the 0.80 level is the target, but it will take a while to get to that area. In time will more than likely be bought into as they offer value, extending all the way down to the 0.75 handle, especially as the 50 day EMA has broken above that region.
However, I do recognize that this probably comes down to stimulus more than anything else, so that is worth paying attention to. Stimulus of the United States will continue to weaken the US dollar but there are some questions about whether or not Joe Biden can get a huge package through Congress, and as long as that is the concern it will more than likely cause a bit of hesitation.
However, once it is all said and done, there will be a lot of stimulus, and therefore it is likely that we will continue to see buyers on these dips regardless. I have no interest in trying to short this market anytime soon.