The Australian dollar was positive early on Monday, as we continue to see the markets react to interest rates more than anything else at the moment.
AUDUSD
The Australian dollar rallied early on Monday but continues to see a lot of noisy behavior near the 0.6950 level. This is an area that has been important support recently, but in the last week or so has shown itself to be resistant as we broke down below it. This is a simple case of what is known as market memory and a lot of traders out there will be familiar with this.
Because of this fact, I think you have to accept the fact that perhaps the market is likely to be more of a situation where you are fading rallies as they occur, especially near the 0.6950 level as the 50-day EMA now lives there.
Fading Rallies in a Chaotic Environment
If we can break above it, then we could re-enter the previous consolidation area and that would make a little bit of sense if we get more risk appetite out there as the US dollar has been lifted by higher rates in America despite the fact that the Australian dollar itself has seen a couple of interest rate hikes recently. This is all about risk appetite and the flow of global trade I suspect and that will continue to be the major driver of not only where this market goes, but many others.
I prefer to fade rallies that show signs of exhaustion in an environment that quite, frankly, just is chaotic. It's only a matter of time before we get another headline out of the Middle East that gets people bent out of shape. Ultimately, though, if we do get some type of peace breaking out in the Middle East, it would make quite a bit of sense that eventually the Aussie takes off, but we could visit the 200-day EMA near the 0.6740 level before that happens.