- The AUD/USD currency pair initially pulled back a bit Monday, but then turned around to show plenty of strength.
- The market then started to reach the 50-day EMA, which is a large indicator that a lot of people pay close attention to.
- The market is sitting just below the 0.70 level, which is a large, round, psychologically significant figure.
- With that being the case, it does make quite a bit of sense that we would see hesitation.
Waiting On the Fed
We have the Federal Reserve meeting on Wednesday, and that will cause quite a bit of noise in this market. The shooting star that formed on Friday seems to be rather negative, but it looks as if the market is trying to break above the top of that candlestick and threatened that 0.70 level. If we can finally break above there, I think there is about a 50 PIP area of resistance in the sense of the 0.7050 level.
Any sign of exhaustion in the short term probably gets sold into, but I think that the Federal Reserve meeting on Wednesday will be the main driver as to where we go next. We will have to pay close attention to the idea of whether or not the Federal Reserve will change its attitude, or if it will continue to look very hawkish. The more hawkish the statement is, the more likely it is that we will see the pair fall.
At this point, I would love to see some type of exhaustion that we can get involved in and start shorting. It is not until we break above the 0.7050 level that I would start to look in the other direction. Furthermore, I would need to see some type of a huge change in the attitude of central banks around the world, and I think it’s probably asking quite a bit to see this market go a lot higher in the short term. Ultimately, this is a market that I think has quite a bit further to go, reaching down to the 0.68 level, maybe even the 0.67 level after that. Volatility is probably the only thing that you can count on, so keep that in mind as well.
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