In general, this still looks to be a “fade the rally” type of market, but things could change depending on what Jerome Powell has to say during the press conference.
The Australian dollar had a wild session on Tuesday after the Reserve Bank of Australia raised interest rates by 50 basis points. That being said, the market shot straight up in the air to break above the 0.71 handle, but by the end of the day, we started to see selling pressure reenter the market. The fact that we gave back so much of the gains is a bad look, and it does suggest that the Aussie dollar is going to fall from here. The market has been very negative in this general vicinity, and I think it will continue to be difficult.
If we were to break above the 0.72 level, then the market might have the opportunity to go to reach the 200-day EMA. That being said, the market is going to continue to see the Federal Reserve as the key to where we go next, as the FOMC meeting is currently going on. By the end of the day Wednesday, we will not only have the interest rate statement coming out of the United States, but we also have a press conference to pay close attention to. If the Federal Reserve continues to look to be very hawkish, that will continue to push this market towards the US dollar.
If the market were to break below the 0.70 level, it would be a major breach of support. After all, we have been hanging around in a 500-point range between 0.70 on the bottom, and the 0.75 level above. If we do break above the 0.72 level, it would be very bullish because we will have broken above the top of several wicks to the upside, so that is something that we need to be cognizant of what goes on. At this point, it is going to come down to the Federal Reserve, so it is difficult to predict anything, but if you watch the price action during the trading session on Tuesday, it is clear that the market still favors the downside and by extension, the US dollar. In general, this still looks to be a “fade the rally” type of market, but things could change depending on what Jerome Powell has to say during the press conference. Most traders expect a 50 basis point hike, so anything more than that would also shock the market.
