The Australian dollar has rallied rather significantly on Monday, as we continue to see a lot of buying pressure. That being said, this is a market that has opposing central banks as far as rate outlooks, so this makes sense.
AUD/USD
The Australian dollar has rallied rather significantly during the trading session on Monday as the 0.71 level is a large round psychologically significant figure that a lot of people will be watching very closely as it has been resistance previously and of course over the longer term it's been important multiple times.
Short-term pullbacks at this point, I think you have to look at this as consolidation that's looking for some type of floor and I think it has found it near the 0.69 level. The 0.69 level being broken to the downside would of course be very negative for the Aussie, but this would also show the USD being strong in general.
Monetary Policy Divergence
It could open up a move down to the 50-day EMA which is at the 0.6783 level. If we can break above the 0.71 level, it's likely that the market is likely to continue to reach towards the 0.7250 level.
Ultimately this is a market that I think continues to favor the Australian dollar in general mainly due to the fact that the Reserve Bank of Australia is likely to raise rates this year while the Federal Reserve is likely to cut them.
However, we are still trying to digest a lot of upward momentum, and I think ultimately, we have a little bit of sideways action in order to find some type of value. If we break down, I think it's a bit of a reset and although the US dollar could strengthen again against the Australian dollar, I would prefer to short other currencies against it as at least this one has a hawkish central bank supporting it.
Ready to trade our AUD/USD Forex forecast? Here’s a list of some of the best Australian forex brokers to check out.