The Aussie dollar continues to be strong in general, despite the fact that the US dollar has taken the driver’s seat in general as far as the foreign exchange markets are concerned.
AUD/USD
The Australian dollar fell a bit during the early hours on Monday to test the crucial 0.69 level. This is an area that has previously been important in both directions, and I think this gives us an area that maybe we have to test it to find out whether or not the buyers will come back.
Keep in mind that the Australian dollar is a little bit different than many other currencies out there as the Reserve Bank of Australia is likely to raise rates sometime later this year. That of course is bullish for the Australian dollar.
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If we were to break down below the 0.69 level, then it opens up the possibility of a move down to the 0.6750 level. The 50-day EMA sits just below offering support and therefore I think it's a situation where traders will be looking at this as a nice floor for the market.
Hawkish Reserve Bank Outlook
While I don't like the idea of shorting the US dollar against multiple other currencies, the Australian dollar might be a bit of an outlier here due to the fact that we have the Reserve Bank of Australia certainly suggesting that it is going to remain hawkish.
To the upside, the 0.71 level is a major barrier, and this is an area that I think if we can break above there, then the Aussie dollar could go looking to the 0.73 level. I do think that even if the US dollar strengthens quite drastically, this is probably one place it may struggle to do so, or it will gain a lot less than it will against other currencies mainly due to the interest rate differential coming in and of course the overall central bank behavior.
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