- The AUD/USD has rallied a bit during the trading session on Thursday as we continue to see it consolidate overall.
- Keep in mind that the Australian dollar is highly sensitive to risk appetite, and therefore it is going to get a lot of external influence.
- As things stand right now, the Aussie is currently stuck between the 50-Day EMA on the bottom and the 200-Day EMA on the top.
As these 2 indicators are widely followed, it should not be a huge surprise to see the market doesn’t really know what to do now. It’s possible that we could see a lot of back-and-forth over the next several days, but it is worth noting that the CPI numbers are coming out on Friday, which could throw a little bit of a monkey wrench into the program. Nonetheless, when we see markets trade between these 2 indicators, quite often we will see a significant amount of volatility happen eventually, kicking off a much bigger move. I think this is what the Aussie is trying to do, with an eye on the 0.69 level above as potential resistance.
Liquidity Will be a Major Issue
A lot of this will come down to commodities as well, but it should be noted that metals are doing reasonably well, therefore it does help Australia. Also, if China is truly going to reopen, then should be good for the Australian dollar, as China is by far the biggest export market for Australians. Nonetheless, there is a lot of fear out there so don’t be surprised if we see a bit of trouble going forward. I think at the very least you should look at this through the prism of the market that could get somewhat choppy and noisy between now and the end of the year.
Speaking of the end of the year, we must worry about liquidity concerns as well, so that’s part of why I’m not overly concerned about trying to put on a huge position right now. Once we get through the FOMC meeting next week, and the ECB meeting the next day, it’s difficult to imagine what is going to be moving the market other than some type of unforeseen news item. Liquidity will be a major issue, so we could have erratic moves but at the end of the year, I typically try to stay far away from big positions.
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