The Australian Dollar has struggled at significant resistance levels. The question at this point in time is whether or not the market will continue to see downward pressure or will the buyers come back in and support the crucial 200-day EMA. This could be a situation where traders are looking for a sign of momentum.
As things stand right now, we are on the precipice of making a bigger decision. The overall markets now are starting to look at the US Dollar through the prism of strength, and of course, have been punishing a lot of other currencies and commodity markets.
Unfortunately, the Australian Dollar is highly sensitive to commodity markets, and that will continue to be a big problem. The market turning around the way it has is a sharp contrast to the last couple of days, so it's definitely worth watching.
Top Regulated Brokers
Ultimately, the behavior of the Australian Dollar is a currency that is just trying to figure out where we are going as far as risk appetite is concerned, and of course, what's going to happen with some commodities such as gold, iron, aluminum, etc. That being said, the market continues to focus on Aussie exports, and the ability of Asia to demand more or less.
Momentum is Stalling
The momentum of this pair has stalled a bit, and it is interesting to see that there are a lot of buyers out there willing to stand in the market and defend the 200-day EMA. The question at this point, of course, is whether or not that remains the case going forward. It will be interesting to see whether or not the market could change things, or if we are “stuck” here.
The overall consensus is that the US Dollar is going to be stronger than most currencies as the Federal Reserve is likely to raise interest rates at the end of the year, but it's also worth noting that the Australian Dollar has a reasonably hawkish stance in the terms of the current trading and economic situation, Central Bank, and that has provided a little bit of a boost for the Aussie Dollar.
Will Momentum Return?
The question at this point in time is going to be whether or not we get momentum in the market, and that would be the alternate scenario. After all, we could see market participants suddenly make up their minds in one direction or the other, perhaps based on weaker US numbers, which could help.
That being said, the exact opposite is also possible. Maybe there's a run to the US Dollar as traders try to find safety. This is the typical reaction to fear, buying the US dollar, and running from the commodity market based currencies, and Asian ones as well.
Where to Go Next?
Ultimately, this is a market that I think will remain very choppy, and I do think that one of the most important things to do at this point in time is to watch your position size. After all, we have the seasonality of a fairly quiet market, but we also have to worry about any headlines in places like the Middle East flaring up and causing risk appetite destruction or acceleration.
The Australian dollar could be a place where risk hunters run to, as it had previously been somewhat protected from the US dollar. This market will continue to focus on many different headlines, such as the war situation, trade routes, and the flow of buying or selling when it comes to the bond markets and the US dollar. While the Aussie is relatively strong, the focus remains on the US dollar overall.
Ready to trade our daily AUD/USD Forex analysis? Check out the best forex trading platform for beginners Australia worth using.