The Australian dollar continues to see a lot of volatility, as we are trying to sort out the next move. At the same time, the bond markets are all over the place and it looks as if traders are starting to price in the idea that the Federal Reserve is going to have to start cutting rates in March. If that’s going to be the case, then it obviously will hurt the US dollar. The Australian dollar will be a beneficiary, but at this point it looks like the bond markets are starting to rethink things. This is a short-term move, and we do have a lot of support underneath near the 200-Day EMA, and the psychologically important 0.66 level.
On the upside, if we can break out above the highs of the last couple of candlesticks, then it is more likely than not that we will see a surge higher, perhaps trying to reach the 0.69 level, an area that had previously been significant resistance. If we can break above there, it’s more of a “buy-and-hold” scenario, but at this point in time I just don’t see that happening. All things being equal, I think that we probably spend most of the next couple of days going back and forth, trying to sort out which direction to go next, but once we do get a little bit of momentum, I think that there will be a huge “FOMO trade” going into the market. The Australian dollar has been very strong as of late, but we are also trying to work off some of that froth, so I think we are more or less range bound, perhaps with a little bit of an upward tilt. If we were to break down below the 0.65 level, then we could see the market breakdown.
Keep in mind that the Aussie dollar is highly levered to the commodity markets, and most certainly Asia itself. Because of this, you will have to pay attention to several things at once, not the least of which of course will also be the bond markets in America and what yields are doing in that country.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.