- The Australian dollar witnessed an initial downturn during Friday's trading session, but subsequently showed signs of a resurgence. It appears that traders have concluded their selling activities and may have found a measure of support.
- This development is intriguing, especially considering that the U.S. jobs report and overall employment figures exceeded expectations.
- That being said, they were not blow out figures, so I think at the end of the day we will probably see a resumption of what has been the norm for the last couple of weeks.
Market participants seem to be placing a strong focus on the Federal Reserve's actions, firmly believing that the central bank is poised to implement multiple rate cuts in the coming year. This sentiment has exerted considerable pressure on the U.S. dollar, albeit with some recent fluctuations. Consequently, it appears that we may be on the cusp of a resumption in the overarching trend of shorting the U.S. dollar, although the market remains characterized by a degree of unpredictability. With that being the case, you need to be very cautious with the position sizing as you could get slapped very hard with reality if we see a sudden shift in the bond markets.
The Australian dollar and the global economy
The AUD/USD is intricately linked to the global economy, particularly Asia and commodity markets. As long as there is an expectation that the Federal Reserve will inject liquidity into the global economy, it stands to reason that the Australian dollar may benefit from this scenario. The extent of this potential upswing remains uncertain, but it would not be surprising to see the Australian dollar revisiting the 0.6850 level or even reaching the 0.69 level, which represents a key area of resistance and marks the upper boundary of the broader consolidation zone.
A breakdown below both the 50-day Exponential Moving Average and the 200-day EMA could pave the way for a decline towards the 0.65 level. This area holds significant historical importance, having previously served as a substantial resistance point. As things stand, it appears that the Australian dollar is making efforts to stabilize and may eventually aim to retest its previous highs. It is worth noting the rapid reversal of the initial sell-off, which adds an interesting dimension to the current market dynamics.
Ready to trade our daily Forex analysis? We’ve made this forex brokers list for you to check out.