During Wednesday's trading session, the AUD/USD currency pair experienced a slight pullback and continues to test the 0.68 level. This level has previously been supported, indicating a potential fight ahead. The Australian dollar sympathetically followed the New Zealand dollar overnight as the Royal Bank of New Zealand raised its interest rate by 50 basis points. However, both currencies have since seen a sell-off, which is typical as the two currencies generally move in the same direction. The market appears to be breaking down, but much of this will depend on the strength of the US dollar.
AUD/USD Fundamental Factors
- It's important to remember that the Australian dollar is sensitive to commodity markets and global risk appetite in general.
- It's also heavily influenced by the Chinese economy, which is in the process of reopening.
- However, the global economy remains weak, which raises the question of whether the Chinese economy will benefit as expected.
Ultimately, it seems that the market will try to break down, but there are other support levels worth watching, particularly near the 0.67 level. If there's a "risk on move," perhaps breaking above the 50-Day EMA, it suggests that the Australian dollar could rise to the 0.70 level. This large, round, psychologically significant figure has experienced selling pressure in the past. As interest rates in America rise again, this will likely strengthen the US dollar. This effect will not only be due to interest-rate differentials but also because it will slow down the global economy.
In the forex market, it's crucial to have a well-defined trading strategy and keep a long-term perspective. Traders must also remain vigilant and keep an eye out for important news and data releases that may impact market conditions. The market can be volatile and unpredictable, and it's important to exercise caution when trading markets at the moment, as they have been so noisy and so dangerous, and not just this pair but pretty much anything that I cover. With that being said, the Australian dollar is likely the see the market as a market that is running on fear and panic, followed by elation and bullish behavior. The behavior of markets if drawn on a sine curve would look like high frequency, as we continue to go back and forth on an almost daily basis at times. Position sizing is by far the most important thing you can do in this environment.
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