By Christopher Lewis Christopher L.
The Australian dollar continues to see a lot of noise, but with the Reserve Bank of Australia looking hawkish, this provides a bit of a floor in the range that we have been in for some time.
AUD/USD
The Australian dollar has rallied ever so slightly at the beginning of the trading session on Tuesday as we are now threatening the crucial 200-day EMA.
All things being equal, this is a market that I do think remains somewhat range-bound, and when you look at the stochastic oscillator, we crossed into oversold conditions a couple of days ago, and we’re now starting to react. The question is whether or not the 200-day EMA offers a bit of a barrier.
The interest rate differential does favor the US dollar
If we can break above the 200-day EMA, then we could go looking to the 0.7250 level. The interest rate differential does favor the U.S. dollar, but the Australian dollar has the added bonus of being attached to commodities, and that might be where its real power lies, quite frankly, with the gold market trying to stabilize, the copper market still being very strong, and, of course, the Reserve Bank of Australia being hawkish.
I do think that you have a situation where the Aussie may continue to recover as traders are starting to cut down the possibility that the Federal Reserve might be looking to hold still this month, as opposed to the rate hikes that everybody had anticipated.
Ultimately, I think this remains a buy on the dip. The 0.6850 level remains a floor. The 0.7250 level above offers resistance. This is a market that I think, given enough time, probably continues to go back and forth in this range where, at the bottom of it, it offers a little bit of a discount for the Aussie dollar.
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Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions
As seen on: Pairs Of Aces Podcast,The Trader Guy, FXEmpire
