- In Thursday's trading session, the AUD/USD surged, breaking through the resistance level at 0.68. This impressive rally suggests that the weakness of the US dollar may persist.
- The market's reaction was fueled by lighter-than-expected CPI numbers released on Wednesday, which hinted at potential slowing inflation.
- As global traders closely monitor central bank actions, concerns about the Federal Reserve's potential slowdown have notably impacted the US dollar.
.
The Australian dollar's recent surge brings attention to the resistance level just above, at 0.69. Historically, this level has posed challenges following previous upward movements. A successful breach of this level could potentially pave the way for further gains toward the 0.70 mark. However, given the current overextension of the market, a temporary pullback may be in the cards. Volatility has been a defining characteristic of the Australian dollar due to its sensitivity to both global economic growth and commodity markets.
The primary driver of this market's fluctuations is the US dollar. Market participants are closely monitoring the Federal Reserve's next move, even though it is widely anticipated that the central bank will implement a few rate hikes. The key question is whether traders can be convinced that the Federal Reserve will maintain its "higher for longer" approach. Additionally, the Reserve Bank of Australia's relatively aggressive stance further influences the market dynamics.
A Short-term Pullback is Necessary to Consolidate the Gains
Recent candlestick patterns have demonstrated impulsive behavior, suggesting the presence of momentum. However, a short-term pullback might be necessary to consolidate the gains. The market's sustainability beyond this point remains uncertain, but a successful clearance of the 0.69 level could trigger a notable increase in momentum. In this move, I would expect a serious attempt to break above the 0.70 level, which would be the key for a sustainable rally going forward.
The Australian dollar's rally against the US dollar signifies the ongoing weakness of the latter. This development follows lighter-than-expected CPI numbers, raising concerns about slowing inflation. Traders worldwide are closely monitoring central bank policies, particularly the Federal Reserve's potential slowdown. The Australian dollar's volatility stems from its sensitivity to global growth and commodity markets. While the market may experience a temporary pullback due to its overextension, the possibility of breaching the 0.69 level looms. As momentum builds, future movements in the Australian dollar's exchange rate will depend on market dynamics and the resolution of central bank uncertainties.
Ready to trade our daily Forex forecast? Here’s a list of some of the best Australian forex brokers to check out.