The Australian dollar has rallied after the Federal Reserve meeting, as we have seen the Aussies slam into the 0.70 level. By doing so, we are testing a large, round, psychologically significant figure, that will attract a lot of attention. The Federal Reserve has suggested that they are “at neutral” during the conference, and therefore people have read that as very dovish. However, when you truly read the statement and the transcript, you see how that might be jumping the gun.
The 50 Day EMA has been broken through, binds if you look at the last time the market sliced through the 50 Day EMA, we pulled back from that level again. By doing so, I think it suggests just how continuous the idea of a break above that level is in the short term. I think given enough time, we will continue to see US dollar strength. Even though the initial reaction was negative for the dollar, the reality is that the economic situation is not strong, nor have the economic numbers show that inflation is under control.
We have seen this happen several times in the past, where the Federal Reserve has a major meeting and statement, the market will jump in one direction. However, they then realize that perhaps they got it wrong, and they reverse. This screams like a potential setup in that general vein of things. It will be interesting to see how this plays out, but I think given enough time, that could very well be exactly what happens. The 0.70 level is an area that has been important more than once, and I think we will see a lot of noise right around this area.
The market continues to be noisy, to say the least, and of course, the Australian dollar will have to pay close attention to what’s going on with the commodity markets. Commodities have a major influence on the currency, and as a result, need to pay attention to how things are playing out right now, and therefore I think it’s only a matter of time before we see, despite the fact that everything was so positive after the announcement, you have to say that the move was not necessarily that impressive. Perhaps at that the biggest take away from this chart.
Ready to trade our Forex daily forecast? We’ve shortlisted the best Forex brokers in the industry for you.
