- The AUD/USD has rallied significantly during the trading session gaining over 50 basis points rather quickly.
- Monday is probably going to expend most of the energy that is left in this market, because we have just seen a technical bounce more than anything else.
- After all, this is about the US dollar and not the Australian dollar, as the commodity markets will certainly continue to see a lot of questions asked about it.
The Aussie dollar is now approaching the 0.69 level, an area that previously had been supported. Because of this, there should be a certain amount of “market memory” at play here, therefore I think it’s probably only a matter of time before you with the exhaustion candles form. Whether or not we see it on the daily chart, or the short-term charts is a completely different question, and therefore I think we need to see how things progress over the next several hours, if not even days. This is an area where I would anticipate seeing a lot of resistance, especially as the previous support is there, and now we have the 50-Day EMA coming into the mix.
Trading Difficulties Ahead
Breaking above the 50-Day EMA is a bullish sign, perhaps opening the possibility of a run to the 0.71 level, which is roughly where the 200-Day EMA sits. I do not expect this market to be one that is easily traded, because quite frankly the Australian dollar has been stronger than many of its other G-10 peers, even when the US dollar was on a rampage against everybody else. In this scenario, it does make a certain amount of sense that we will continue to see more of a “fade the rally” type of situation, but it may not be as aggressive as the Euro, or the British pound will be. This has been the case, and even though Ukraine has made a little bit of headway in the war, that does not change the overall economic outlook, although it certainly doesn’t hurt anything. Keep in mind that the Australian dollar will be heavily influenced by global growth expectations, which have come down quite drastically as of late. If we do break out to the upside, the “pain trade” will be to the upside.
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