- The Aussie dollar continues to see a lot of movement on Thursday, as the markets are still pricing in the central bank differential in this pair.
The Australian dollar initially rallied to test the 0.71 level on Thursday but then turned around to show signs of weakness. In fact, as I write this article, it has completely collapsed for the day and now the question is whether or not we will find our way back down to the 0.69 level.
The 0.69 level is an area of significant support that I would be very interested in buying on a bounce. But if we give that up, then we have to have a conversation about whether or not this thing is turning around.
The Reserve Bank of Australia is expected to raise rates later in the year, so I do think the Aussie dollar remains somewhat firm, while the United States dollar is expected to see a couple of interest rate cuts later this year from the Federal Reserve. So it all ties together quite nicely.
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Risk Appetite and the Chinese Economy
That being said, the biggest problem that the Australian dollar might have is a risk appetite situation, as it is highly tied to the Chinese economy, which of course has seen better manufacturing numbers as of late. That is part of what has risen this market to these levels.
Ultimately, though, I think this is a pullback that probably gets bought into. While I think the US dollar is a little oversold at the moment, the reality is this is one of the few currencies that I think will fare pretty good against the US dollar unless of course we see some type of major sell-off problem in multiple markets.
With that being said, I remain bullish of this pair. I am just going to sit back and wait to see whether or not I get a little bit of a bounce so I can trade on the right-hand side of the V, which is the way that you enter a market right along with the rest of the momentum players out there. I still remain bullish, but I also recognize that the dollar has come roaring back as traders are seemingly running for the hills at the moment.
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