The AUD/USD rallied significantly during Tuesday's trading session, reaching the 50-Day EMA, following a surprise interest rate hike by the Reserve Bank of Australia. However, traders should be cautious about getting long on the Australian dollar, given the uncertainty in the global economy and the upcoming Federal Reserve meeting on Wednesday.
The Australian dollar is highly levered to global growth, and there are a lot of questions around the world about how that will play out. The recent disappointing Chinese numbers have added negativity to the Australian dollar as well. The 50-Day EMA is a key technical indicator that many traders will be watching, and it's likely only a matter of time before some type of resolution is reached. The market faces headwinds in both fundamental and technical aspects.
Even if the market were to break above the 50-Day EMA, the 0.68 level above is a major ceiling, with the 200-Day EMA sitting in the same area and carrying significant historical importance. On the other hand, if the market triggers a breakdown from current levels, the 0.66 level is an area of interest, as it represents the bottom of the "H pattern." Additionally, the market is currently testing a bearish flag, so traders should watch for resistance in this area.
Watch for Key Technical Indicators
- Ultimately, this is a market that will have to make a bigger decision eventually, with traders watching closely for signals of a breakout or breakdown.
- If Jerome Powell, the Federal Reserve Chairman, hints at a more hawkish stance during Wednesday's meeting, this could send the market lower over the next few weeks.
- It's not until the market breaks above the 0.68 level that traders should consider buying the Australian dollar.
At the end of the day, the Australian dollar rallied significantly in Tuesday's trading session, reaching the 50-Day EMA following a surprise interest rate hike by the Reserve Bank of Australia. However, the market still faces uncertainty in the global economy, particularly given recent disappointing Chinese numbers. Traders should watch for key technical indicators, including the 50-Day EMA and the 0.68 and 0.66 levels, as well as the potential impact of the Federal Reserve meeting on Wednesday. With careful positioning and a cautious approach, traders will be able to take advantage of the overall concerns around the world. Remember, the AUD is vulnerable to growth concerns.
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