- The AUD/USD has pulled back from the 0.65 level, an area that has been very important for a while.
- At this point, the market looks as if it is ready to continue granting lower, therefore I think it’s only a matter of time before we reached the 0.63 level.
- With this being the case, I think it’s very likely that we will continue to see downward pressure, especially as the CPI numbers are coming out on Thursday, and that of course will have a major influence on what happens next.
After all, the market continues to pay close attention to what the Federal Reserve is going to do, and they believe that the market is going to continue to see risk appetite through the prism of either tight or lose money. If the CPI number is extraordinarily strong, that will continue to drive the US dollar higher, as the market will be paying close attention to interest rates in America. Furthermore, the bond sale was horrible in America during the session, so that also drove interest rates higher in America. All things being equal, it’s very likely that we continue to see money running to America, especially as the Australian dollar is its own special circumstance.
Volatility and Risk Appetite Go Up
Keep in mind that the Reserve Bank of Australia has recently balked at raising interest rates as high as expected, as they must worry about the housing market. With that being the case, the market is likely to continue to see a lot of volatility but will also pay close attention to China. Remember, there’s a bit of a “stealth lockdown” in some cities, so therefore demand for Australian goods will probably drop. China is by far Australia’s biggest trading partner, as it provides a lot of the commodities necessary for that juggernaut economy.
If we do a turnaround break to the upside, I believe that clearing the candlestick from the Tuesday session could open a move to the 0.67 level, an area that has been important multiple times. Because of this, I think a bit of market memory comes into the picture and it offers a ceiling unless something truly changes from a fundamental standpoint. At this point, it still favors the United States and as volatility picks up and risk appetite-related markets, it will continue as such.
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