The Australian dollar initially tried to rally during the trading session on Wednesday but gave back the gains to break down quite drastically. With that being the case, the market looks very likely to continue to reach towards the 0.70 level underneath, which is the bottom of the major zone of influence that I have been talking about.
AUD/USD Video 29.10.20
For some time now, I have been watching the area between the 0.70 level and the 0.71 level. It is essentially a major support barrier that the market has not been able to break through. However, you can see that we are clearly forming a “lower highs”, and now see the 0.70 level as the bottom of a potential descending triangle. This will of course attract a lot of attention and get people very interested in shorting this pair if we break down through there. Yes, I recognize that the 200 day EMA sits just below there, but at this point in time I believe that the likelihood of some type of emotional crescendo in the markets is very possible.
Markets have been ignoring the fact that the coronavirus was going to pick up again, and now it seems like suddenly they remember that. Because of this, I believe that the market is likely to be very vulnerable as we get a bit of “panic selling” when it comes to all things risk asset related. With that in mind, I do believe we are getting closer to breaking down than ever. Short-term rallies are to be sold.
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This article was originally posted on FX Empire