Aussie dollar cracks major levels

18 January, 2017

The Australian dollar swung heavily today as US bulls finally looked to sell off in the wake of economic uncertainty around the United Kingdom. Volatility was most certainly the key player for the day, and traders took full advantage. Yesterday there were strong comments that the AUD was currently overvalued, but it would seem that the market had other ideas as it raced up the charts knocking out some key levels along the way. The market is further poised for today consumer sentiment, which will give some indication if the Trump effect has spread to Australia in the wake of recent events. Expectations have previously been very low and I would expect this to be the theme going forward but with the possibility of a surprise in economic data as we have previously seen.

For the AUDUSD traders resistance was not a problem today as it smashed through 0.7531 on the charts and looked to climb even higher, coming up just short of 0.7567. The 0.7567 level is very strong and I would expect to see some stiff resistance unless we see some positive fundamental data come out in the next few hours. In the event of a pullback I would expect that the 100 day moving average could act as dynamic resistance if it is a strong pullback, otherwise I would anticipate that former resistance level at 0.7531 looking to hold out in the long run.  

One of the interesting things about a stronger USD has been the flow on effect to metals, none more so than silver which has so far seen a solid bullish trend appear in the short term and has briefly pushed through resistance at 17.133. The strong sell off today in USD certainly had a big impact in helping making this progress, but the real test is set to come as it sizes up resistance at 17.308, which I would expect to be a very strong level. The 200 day moving average is also intersecting with this strong level of resistance and has previously acted as a strong dynamic level for market movements. However, the trend is certainly your friend and this could be the case as silver looks to climb higher in the build up to Trumps inauguration on Friday.

Lastly, the NZDUSD has managed to also climb up the charts, but recent reports around the dairy auction paint a messy picture that shows that New Zealand's economy may not be as strong as recent economists had predicted. The jump higher today to resistance at 0.7222 has shown there is strong demand during patches of weakness, however this level has proved time and time again to also fight back and push prices lower.

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