- The Australian dollar initially did try to rally a bit during the trading session on Wednesday, but it continues to see a lot of noise near the 0.635 zero level.
- This is a market that has no business rallying for a longer term move in this fundamental scenario.
- But with that being said, the market will do whatever it is the market decides to do.
The US dollar had gotten way ahead of itself for a while there, and I think what we had seen was a little bit of profit taking. But now we have to look at this through the prism of whether or not it is a little overdone or if we need to go a little higher. At this point, I think a breakdown from here could reach the 50-day EMA, and anything below could open up the possibility of a move down to the 0.62 level.
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On a Break Higher
On the other hand, if the market were to turn around and break above the 0.64 level, then the market could go looking to the 200 day EMA. But I think this is going to be a US dollar story and not so much an Australian dollar story. After all, the Aussies just cut interest rates, and they are tied to China. So, there's not a lot going on there that gets people excited about owning this currency.
Furthermore, the Australian dollar is a commodity currency and that of course comes with its own issues in a time when tariffs seem to be very likely and we don't know how that's going to play out. All things being equal, the market rallying at this point in time is something that I would look at with a little bit of suspicion, especially after the action of the last 48 hours. I do favor to short the Aussie, but if I see the US dollar losing strength everywhere else, then maybe it's worth a shot, but I think we still have quite a bit of work to get convincing, at least in this currency pair.
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