Many Australian Dollar Bullies are testing Australian Dollar Price Outlook for Support in the low to mid 60s. One of these bears is the Australian Bear Billiards.
Billiards loves the AUD/USD resistance line and he wants to put some pressure on it. He’s trying to raise the Aussie Long Term Interest Rate from its current 2.00% to 3.00%. He’s using high leverage and is willing to borrow up to $2 billion for this move.
Let’s look at the DCF Spread. We can see that he thinks that the DCF Spread is still around 22.25 and if we had the USD Cross to 54.50 we would have an almost break even scenario. This is why he’s buying USD cross to breakout, now he has the currency open for his short selling action.
This is a really important chart to watch to find out if the AUD/USD will break above the DCF Resistance Line. You can see from this chart that there has been some buying coming into the market as well. He believes that a break will occur between the current level of 26.64 and 34.78 and this is where the price will begin to turn around. If he’s right then you may get to a bottom at 34.46.
This is the Max Squeeze and as you can see he is testing the breakout level of 35.54 with the short position. If he gets it below 35.60 then he would be happy.
The Price Action is very important and the Max Squeeze has broken to the downside. This is where the bears are waiting. If the price continues to test the upside and breaks above the Max Squeeze then this is going to be the point where the bears enter the trade.
But we need to make sure that the USD Cross breakout on the left side of the chart is below the DCF Resistance Line. If it’s below the DCF Resistance Line then the bulls are going to enter the trade and not the bears. It’s that simple.
Even though the bears are testing the Max Squeeze, this is not a sure way to get into the trade. If they get it below the market then they will enter and the other bears will probably follow them. The only way to get in the trade is if the Price goes above the Max Squeeze.
With the Max Squeeze tested and the break around 35.60 the bears are hoping that the Market will continue its upward movement and this will trigger the DCF Cross breakout to the upside. Once the breakout happens then they will most likely start to exit the trade and the bears would end up buying as well.
The Max Squeeze is most likely still above the current level at 35.84 and we are now at the cross to the upside of the Market. If the Max Squeeze and the breakout are broken we would see the USD Cross to 56.40.
This will give the bulls a chance to buy and once the break of the Max Squeeze is confirmed we would see the Market sell off again as the bears try to move the price lower. Remember this is a very volatile market with no clear break above the Max Squeeze.