The Aussie dollar has rallied a bit against the US dollar during the trading session on Thursday to jump above the 0.73 level. However, it is probably worth noting that we pulled back a bit, so it suggests that we are going to continue to have volatility.
The Australian dollar of course is a currency that is thought of as a “risk asset” and is highly levered to commodities. This is part of what has been driving the Aussie higher, but also the fact that New Zealand has raised interest rates and looks very likely to do more of the same. The Aussie tends to move in concert with the kiwi, so this does make a certain amount of sense that there is a bit of a “knock-on effect” over here.
However, it is worth noting that there is still a lot of risks out there when it comes to geopolitical concerns, as the situation in Ukraine continues to get worse, not better. Yes, the Russians and the Ukrainians have been speaking, and that of course is a good sign. However, it should also be noted that French President Emmanuel Macron stated during the day that after a conversation with Vladimir Putin he believes that “the worst is yet to come.” In other words, it is probably not a stretch to think that perhaps we get a huge “risk-off” type of move.
If that is going to be the case, then the Australian dollar will probably take it on the chin. Granted, there is no way to know whether or not that happens, and it is worth noting that we have broken above the 200 day EMA. At this point, if we can break above the highs of the trading session, then I think that gives us a bit of an “all clear” to get long.
On the downside, if we were to break down below the bottom of the candlestick for the Thursday session, it is very likely that we will pull back towards the 50 day EMA. The 50 day EMA currently sits at the 0.72 region and is tilting higher. The previous trendline has held as I write this, but I consider that to be a minor factor in making a decision in the market right now. The only thing you can do in these trying times is to keep your position size reasonably small.
