- The Australian dollar has been subject to some volatility in recent trading sessions, as it struggles to overcome the overhead pressure that it is facing.
- One of the key factors that has been contributing to the currency's challenges is its close relationship with the commodity markets.
- As such, the Australian dollar is heavily tied to global growth trends.
Aussie Bonded to Commodity Markets
However, global growth is currently at a standstill, which is causing concerns for many traders. Inflation is also raging across the world, which could be good for commodities, but ultimately, a lack of growth is likely to drive down demand for many of the assets that come out of Australia, such as iron, aluminum, and copper.
Another critical factor that traders need to keep in mind when assessing the state of the Australian dollar is its relationship with the Chinese economy. Any changes in the Chinese economy can have a significant impact on the Australian dollar. As such, fluctuations in the Chinese economy should be carefully monitored.
From a technical analysis perspective, if the Australian dollar can break above the 0.67 level, we may see a run towards the 50-Day EMA. However, this is likely to cause some technical resistance, as the 200-Day EMA is near the 0.68 level, which is the top of the previous range. As the 200-Day EMA is an important technical indicator that traders closely monitor, it is likely to have a significant impact on the market.
It seems that fading rallies is the best trading strategy for the Australian dollar at present. If the currency breaks down below the 0.6550 level, we could see more selling pressure that could push the currency down to the 0.64 level, followed by the 0.63 level after that. Traders should also keep in mind that the US dollar is often seen as a safe haven currency during times of fear, which could be contributing to the current state of the Australian dollar.
In Summary
The Australian dollar is currently facing significant pressure from multiple factors, including inflation, a lack of growth, and its close ties to the Chinese economy. While there may be some short-term rallies, the overall trend is likely to be downward, and traders should approach this currency with caution. It is essential to keep an eye on the technical indicators and other critical factors that could impact the market and make informed trading decisions accordingly.
Ready to trade our daily Forex forecast? Here’s a list of some of the best Australian forex brokers to check out.