The Australian dollar has fallen a bit to start the trading week, as we see a resumption of the longer-term trend in favor of the US dollar. A “risk off” sentiment has prevailed over the last couple of days, which of course does not bode well for the Australian dollar in general. However, there is plenty of support just below that a lot of people will pay attention to. Because of this, it is worth noting that the 50 day EMA is roughly at the 0.6537 level, and of course the 0.65 level underneath has been important several times. The question now is whether or not the “market memory” will return.
At this point, I suspect that a pullback is needed. If we break down below the 0.65 level, it is very likely that we will continue to see a lot of negative pressure. This will be especially true if interest rates in America continue to rise, as they have given the market a bit of a break lately.
Keep in mind that the Australian dollar is highly correlated with the Chinese mainland, and of course the commodity markets in general. Of course the new Chinese lockdowns are of course working once morest the value of the Australian dollar, China is Australia’s largest customer. In this environment, it will be interesting to see how things play out, especially as the RBA will probably slow down the pace of tightening.
There is a potential shift in the attitude of traders, away from central banks and focus on the core economies. If this is the case, then the US will be the currency of choice as well. With that, I remain bearish, but I also recognize that there is a lot of support underneath.
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