Australian Dollar Reaches 50 Day EMA

The Australian dollar has rallied a bit during the course of the trading session on Wednesday to reach the 50 day EMA, I very commonly followed technical indicator. This is a small breakout of short-term resistance, but ultimately it looks as if the market is ready to face even more resistance above, so I do not necessarily think we have a huge breakout just waiting to happen, but we do have the CPI numbers coming out on Thursday which will have a lot to do with where we go next.

AUD/USD Video 10.02.22

Ultimately, I do believe that this market will move upon inflation expectations coming out the United States, and of course the CPI number will be a major indicator as to whether or not the Federal Reserve will have to become even more aggressive in their tightening.

The tighter that the Federal Reserve gets, the more likely we are to see the Aussie fall, as investors chased higher yields. The 0.70 level above should be thought of as potential resistance, so I do think that you need to be very cautious at this point. Nonetheless, I think that the 0.70 level underneath is a major support level, so we need to pay close attention to that as well. If we were to break through the 0.72 level, then the Aussie may be able to pick up some steam.

Breaking through the 0.70 level to the downside would of course be a very negative turn of events and could lead to massive Australian dollar selling. That being said, I think it is probably going to be difficult to finally break through there, but eventually it could happen. This would obviously be a major sign of US dollar strengthens, and we would probably see it around the world.

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