- The AUD/USD initially plunged during trading on Thursday, but the US dollar has been all over the place as people begin to speculate on what the Fed may or may not do going forward.
- Remember, the Federal Reserve has a monetary policy meeting next week and a statement on Wednesday. As the ECB raised interest rates during the Thursday session, putting downward pressure on the US dollar.
- There is the usual group of suspects out there trying to convince everybody that the Federal Reserve is about to give Wall Street cheap money again, and start to “pivot.”
The entire investing thesis of some traders is about whether the Federal Reserve is going to pivot. By changing its monetary policy, the idea is that cheap and easy money will be coming down the road and therefore good times are here again. However, the inflationary numbers are still very hot, and it’s probably worth noting the GDP in the United States came out hotter than anticipated on Thursday. I suspect that Jerome Powell is probably going to have to come out on Wednesday and tell everybody yet again, that he is nowhere near slowing down tightening.
Looking to Fade Rallies
Because of this, we are setting up for a very volatile move, it is worth noting that the 50-Day EMA’s is just above and could cause a bit of technical resistance. Furthermore, the 0.65 level is obviously a large, round, psychologically significant figure, so that must be thought of as well. In this environment, it’s very difficult to get overly aggressive one way or the other, and you will certainly need to be cautious about your position size.
However, this is a market that I think continues to see a lot of back and forth based upon not only the Federal Reserve but also the fact that the Asian economy is taking a bit of a head. Remember, Australia is one of the biggest exporters into Asia, as it supplies the Chinese mainland with all its raw materials. I still like the idea of fading the rally, although the change in the shape of the daily candlestick over the last several hours tells me that we may have a little bit more of a fight on our hands going forward in this pair.
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