Aussie Approaches the 200-Day EMA

The fight over the next week or so could determine where the Aussie goes longer-term.

• The AUD/USD currency pair has rallied significantly again during the training session on Thursday to reach the 200 Day EMA.
• The 200-Day EMA is offering a bit of dynamic resistance, and at this point, it’ll be interesting to see how Friday turns out.
• We have seen a major move higher by the Aussie dollar, but it will be the follow-through and what happens heading into the weekend that will truly give us a bit of an idea as to where we are going.

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If we break above the 200-Day EMA, then it’s likely that we could look to the 0.73 level. The 0.73 level being broken to the upside could be a bit of a trend change, but right now I think that we have a battle setting up in the bond market that is going to continue to cause a lot of volatility. Bond markets continue to set up the next trade, and right now it’s worth noting that interest rates have dropped, but if they turn around and rally in the United States, that will send this pair lower.

The interest rates falling could send this market much higher, perhaps ready to head into a bullish move. That being said, the market is likely to continue to see a lot of volatility regardless, and if we did break above there, it could send the Aussie dollar looking to the 0.78 level. This could also be influenced by the commodity markets, and maybe even gold. Regardless, I think the fight over the next week or so could determine where the Aussie goes longer-term.

Another thing to worry about at this point is going to be the bank runs that we see in China, and therefore any damage to the mainland Chinese economy. If that economy starts to fail, it will have a huge influence on the Australian dollar and could send this currency much lower. In general, although this pair has been very bullish, it’s worth noting that the rest of the major currencies aren’t necessarily as strong against the greenback, so you will have to be very cognizant of the fact that typically all markets come back to correlations again. In other words, although the Australian dollar is probably the strongest currency right now against the US dollar, it’s not necessarily something that I am willing to jump in right away.

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