The Australian dollar finds itself near the crucial 50 Day EMA on Tuesday, as there are still many questions about where we go next.
AUD/USD
The Australian dollar has rallied during the trading session on Tuesday, reaching the 50-day EMA, which of course is an indicator that a lot of traders will be watching. All things being equal, this is an interesting play in the markets as interest rates in America spiked at one point, but then fell apart, but then after that started to rally again.
Ultimately, I think the markets are quite a bit of confusion just waiting to happen. And I think it does make a certain amount of sense that the Australian dollar might be a bit of an outlier due to the fact that the Central Bank in Australia has been much more hawkish than many others. I don't have any interest whatsoever in trying to get too cute here.
Global Scenarios and Yield Sensitivity
I think the reality is we need to be very cautious because the global scenario is one that is a disaster waiting to happen. You have to be very cautious with your position size, and you also have to realize that at any given moment you could have a scenario where traders find themselves reacting to yet another headline in the Middle East that just throws things into disarray.
The 10-year yield in America is crucial to pay attention to, and the 4.3% level seems to be the “line in the sand” as it were for risk appetite. Ultimately, I believe this is a market that will remain very volatile and very difficult to get your hands around, but the Australian dollar being an outlier with a somewhat tight central bank makes a huge difference in the way it might behave.
I have no interest in putting a huge position on quite yet, but if we were to break above the 0.70 level, that would be an extraordinarily bullish turn of events in favor of the Aussie dollar and perhaps even a sign that the US dollar may have gotten a little bit too far ahead of itself and therefore probably sells off against most things. If we break down below the 0.69 level, then you have a situation where we may visit the 200-day EMA in some type of panic.