- The AUD/USD initially tried to rally during the early hours on Tuesday, as the Reserve Bank of Australia raised interest rates, and suggested that they were going to do so going forward.
- However, 12 hours later the market suddenly looks very soft.
- This is because interest rates have climbed in America as well, and after all, the US interest rate market drives almost everything at this point.
Keep in mind that Australia is also highly sensitive to what’s going on in China, and now that we have broken back down below the 0.67 level, it looks like our attempts to break over the 200-Day EMA have failed. That’s not to say that we can’t rally again, just that we probably will continue to struggle overall. With that in mind, I think we get a situation where you’re looking for signs of exhaustion to fade, just like we saw during the day on Tuesday. I continue to draw from here, the next obvious area of potential support will be the 50-Day EMA, which is currently near the 0.6620 area.
Australian Dollar to Continue Suffering
Breaking above the top of the inverted hammer for the Tuesday session is a bullish sign, but it’s not until we clear the 200-Day EMA that you can suggest there is some type of victory here. With that in mind, I’m looking for value in the US dollar again, because quite frankly it had been oversold for far too long. When you look at the longer-term chart of the US Dollar Index, we are getting close to an area that should offer a lot of support in general. I suspect that the Australian dollar will continue to suffer at the hands of whatever China is doing now, which quite frankly seems to be trying to reopen, but not really sure how to deal with giving freedom of choice to people. In other words, the bureaucracy is probably going to get in the way in China.
Ultimately, this is about risk appetite which of course has been suffering for a while, as the global economy is almost certainly going into a deeper recession. If that’s going to be the case, then I suspect we’ve got a situation where the Australian dollar will continue to suffer overall, as it is considered to be a riskier asset.
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