- The AUD/USD has fallen during the trading session on Tuesday after initially rallying.
- By doing so, the market will start to look negative yet again, and if we can break down below the bottom of the candlestick, and perhaps even the 0.66 level, it’s likely that the Aussie will continue to see a lot of its negativity.
- All things being equal, this is a situation where we are looking at risk appetite in general, and if risk appetite does get beaten down a bit, that’s very negative for the Aussie.
It’ll be interesting to see how this plays out, because the US dollar of course is a safety currency, and there are a lot of concerns about a recession. The Australian economy is a huge exporter of commodities to the rest of the world, so it does make a certain amount of sense that we would see the Australian dollar rise and fall with the global outlook. The US dollar has taken a little bit of a beating as of late, but it looks as if the Aussie is finally giving back some of the moves that it had made.
Tight Monetary Policy to Destroy Global Growth
It is probably also worth noting that the 0.69 level failed to get broken above, and that of course is important, as it was a large, round, psychologically significant figure, and of course, an area where we see a lot of action in the past. In other words, a certain amount of “market memory” comes into the picture at this point, and I think you need to understand that this is a situation where traders were fully beginning to think that perhaps the Federal Reserve was going to lose in this monetary policy. However, it’s been obvious as of late that they have no interest in doing so, and I do think that it is probably only a matter of time before the rest of the world comes along and continues to time.
In fact, the Bank of Japan did so de facto, raising the accepted band of interest rates in its bond market overnight. Ultimately, this is a situation where I think you continue to see tight monetary policy will eventually destroy global growth, and I think that is something that you can almost count on in 2023 as there are so many economic headwinds out there.
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