- The AUD/USD has rallied significantly during the trading session on Friday, as we continue to see traders react to the inflation numbers in America coming out at “only 7.7% year-over-year” on Thursday.
- While this is a horrific number, people are starting to think that the Federal Reserve might be closer to easing its monetary policy or at least pausing the monetary policy.
- Ultimately, this is a market that I think continues to be very noisy, and you need to be very cognizant of the fact that the Aussie dollar is highly sensitive to not only interest rates, but commodity markets in general.
The Australian dollar hanging around 0.67 level is a sign that perhaps it is trying to break out, but it’s also an area where you would expect to see a trouble. With that being the case, it is likely that we will continue to see a lot of volatility in this area, as there should be a certain amount of “market memory” in this region as it had previously been so much support for the longer-term chart. The market showing signs of exhaustion could be a nice selling opportunity, but we need the US dollar to pick up a little bit of strength in general.
Waiting for the Federal Reserve
The Australian dollar itself is another situation altogether. After all, the Reserve Bank of Australia has stepped away from tightening as aggressively as it had been. That’s going to be the case, and if the Federal Reserve stays on the same path, then it’s likely we go lower. However, the federal steps away, then which obviously changes everything.
Right now, the market is trying to do everything it can to force the Federal Reserve to step away from tightening, but at the end of the day it’s very unlikely that we will see that happen. Traders are already getting excited about the idea that the Fed may only raise interest rates by 50 basis points next meeting, but we have also had Federal Reserve speakers coming out suggesting that tightening was far from being over. Unfortunately, the Federal Reserve created this entire mess, and it’s their fault that the market doesn’t listen to them. With that being the case, Uncle Jerome is going to have to come out and put the kibosh in this rally. Until he does, it’s difficult to imagine a scenario where the market gives it up.
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