- The AUD/USD initially rallied during Tuesday's trading session but gave back gains as the US dollar picked up strength.
- The market looks like it may be trying to break down to the 0.66 level and potentially below.
- If this happens, the market could go down to the 0.64 level, followed by the 0.62 level.
The Australian dollar market continues to see a lot of volatility and is highly correlated with overall risk appetite. As such, investors are advised to pay close attention to this factor when considering investing in the market.
If the market breaks down below the current region, it could form a bearish flag, leading to a move down to the 0.63 level. This type of environment would be considered "risk off," and the US dollar would likely pick up strength out of fear.
On the other hand, if the market rallies, the 50-Day EMA is seen as the first major resistance barrier, sitting around the 0.6750 level. If the market breaks above this level, it could go looking to the 200-Day EMA, which is near the 0.68 level. However, there is significant resistance between here and there, and traders are expected to come back into the market to start shorting again.
Volatility Ahead
The Australian dollar is considered a commodity currency, and the Australian economy is highly leveraged to Asia. As such, concerns about global growth have a significant influence on the currency. Investors are advised to pay close attention to overall risk appetite and global growth indicators to get an idea of what the Australian dollar will be doing.
Overall, the Australian dollar market is expected to continue to experience volatility in the coming weeks and months. Traders should proceed with caution when considering investing in the market and should be aware of the potential risks and rewards. While there may be opportunities for profit in the market, it is important to be aware of the risks and to proceed with caution. After all, there’s so much out there when it comes to volatility and uncertainty that the Australian dollar will continue to be thrown around. Keep in mind that the Reserve Bank of Australia recently decided to hold on its hiking rates cycle, and therefore a lot of traders are starting to think that perhaps it has peaked already. Regardless, this is a market that certainly looks as if it is vulnerable and if we get a lot of risk off trading, this could be the first place we see pressure.
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