Keep in mind that the Australian dollar is highly levered to the commodity market, so you should be paying attention to those as well.
- The AUD/USD has rallied a bit during the trading session on Wednesday, as the world is waiting for the FOMC Meeting Minutes.
- At this point, it appears that most people believe the Federal Reserve is starting to run out of reasons to stay tight.
- They almost certainly will do so, but that does not mean that the market will try to force their hand. In fact, it’s very likely that the Federal Reserve will stay tight much longer than people anticipate.
- That does not mean that they will be raising rates forever, just that rates will stay high longer than the market is trying to price them to do.
The 50-Day EMA sits just below, and that of course offers a certain amount of support. That would be especially true as it is near the 0.66 handles. The 0.66 handles than would give way to the 0.65 handle, which was the resistance barrier that the market broke out of recently. Regardless, we are still sitting just below the 200-Day EMA, so technically we are still in a major downtrend.
Pay Attention to the Commodity Markets
In fact, when you look around the Forex world, most currency pairs denominated in US dollars are sitting right around the 200-Day EMA, so we may either be seeing a major change in the US dollar for the longer term, or we may be just about done with the correction. Because of this, I suspect that the next week or 2 could end up being crucial for the next several months.
Keep in mind that the Australian dollar is highly levered to the commodity market, so you should be paying attention to those as well. Commodity markets need growth to facilitate demand, so we also need to pay attention to the world economy. It is because of this that I am a little cautious about the Aussie and suspect that if the US dollar does start to fall apart, there are going to be other currencies out there that should outperform. If you choose to be involved in the commodity currency, you may wish to look to the New Zealand dollar which has the benefit of a very hawkish central bank behind it. Remember, the Australians raised rates less than anticipated earlier, which has people questioning just how hawkish they will be over the longer term.