- The AUD/USD currency pair has broken above the 200-Day EMA during the trading session on Tuesday, as we have cleared a major technical indicator.
- That being said, this is much like yesterday, in the sense that we are getting so overstretched at this point it’s not going to take a lot to knock this pair back down.
- The 0.68 level above continues to be a major resistance barrier, as “market memory” comes into the picture as it was the top of the overall previous consolidation area that was so important over the last several months.
Pay Close Attention to the Commodity Markets
At this point, if we were to break above the 0.68 level, it’s obviously a sign that we are going much higher. In that situation we would be looking at the 0.70 level above as a potential target. On the other hand, if we turn around and break down below the 200-Day exponential moving average, then we could drop down to the 50-Day EMA. Ultimately, this is a market that will have to pay close attention to the commodity markets, and of course the whole idea of growth. Ultimately, this is a situation that will be reflective of what’s going on around the world, not just the Australian dollar.
Recently, the Reserve Bank of Australia had a surprise interest rate hike to throw the market into overdrive, but now we have to worry about the Fed meeting, which is currently happening, and the announcement on Wednesday. Because of this, we could get the market turning right back around if the Federal Reserve raises rates, or if it sounds like we are going to continue to see a tight Federal Reserve and of course the market actually believes them.
Either way, when you look at this Forex chart pattern you can see just how overstretched we are, so it does make a certain amount of sense we could see a pullback. On the other hand, if we were to break up of the 0.68 level on a daily close, that might be the signal that the Australian dollar is ready to continue to go much higher. In that scenario, it could be more of a “buy-and-hold” type of situation. With this being said, it is important to be careful of position sizing and being too aggressive at this point as the Federal Reserve will have a major influence on where we go over the next several session.
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