One currency pair I’ve been bullish on this year is the Aussie dollar’s value to the greenback. However, the drop in Aussie futures yesterday and today changes that outlook. This market now appears to be in danger of tracing out a large top that could spell losses in the intermediate term.
Aussie futures started to consolidate at the beginning of July. This looked constructive at the time, like a pause after a breakout from a symmetrical triangle pattern that had formed in April and May.
The sudden drop – at a natural place to expect follow-through buying – shows the bulls have lost control of the market. The greater risk is that the entirety of the price structure since April represents a large topping formation.
It may be early to thinking about going short the Aussie. But to start, the failed rally suggests it’s a good time to exit any long positions. I’ll reassess as we see how the trend evolves in the coming weeks and months.
Good trading, everyone.
