The Australian dollar is hit by the general risk-aversion sentiment, but keeps working its way around key trendlines and support levels. In this updated technical analysis, we explore two possible short term developments.
The four-hour chart presents a clear picture of how the aussie has been acting over the past weeks. We see two important trendlines. The support trendline (T1) has been tested four times since February. The price almost pierced thought it on the fourth time, but renewed buying supported the pair near .9200.
On the opposite side, the aussie is capped by another trendline (T2), which has also been tested four times.
As we approach the intersection between T1 and T2, the price is likely to choose a direction and follow one of two possible scenarios.
The general risk-sentiment could improve and allow the aussie to achieve a new high by breaking through T1. Although the fundamentals in Australia are positive, the aussie is tightly linked to the global demand given its correlation with commodities. Hence, we can imagine that such a boost could come from an official agreement about the lending terms of the Greek bailout.
On the other hand, fear could persist and lead to a technical failure for a re-test of .9000. Once again, we see the developments in Greece as the key factors for a down move. If uncertainty persists and credit worries spread to other EU countries such as Spain or Portugal, then nothing would stop a break down, similar to that of last December.
However, we expect the aussie to remain well supported above .9000 and see any dip below that level to be a good buying opportunity.
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