The Australian dollar initially tried to gain during the session on Wednesday, but found enough resistance at the 0.7475 level to turn things around and rollover towards the 0.7425 handle. That’s an area that has offered a significant amount of support over the last several days though, so the fact that we bounce from there is not a huge surprise. Pay attention to the overall risk appetite of the markets, as the Australian dollar tends to be highly influenced by animal spirits if you will. If we can break above the highs from the session on Wednesday, the market should then go looking for the 0.7510 level. A break above there is a massive signal to start buying as it would be a significant break out. In the meantime, I anticipate seen quite a bit of noise.
The significance of Gold
I believe that the significance of Gold cannot be overstated, but we also need to pay attention to risk appetite. Also, gold sometimes will rally due to fear, and if it some type of safety play that goal traders are approaching, then that will not help the Aussie. Do not get stuck in the trap of both moving in the same direction all of the time, because quite frankly that’s a myth. While it is true that they can have a higher correlation longer-term, there are days and weeks where the to divert just far as direction, mainly because of that concern of economic headwinds, or more often than not: geopolitical issues. Ultimately, expect quite a bit of choppiness in the Aussie dollar, as we have seen so much in the way of noise geopolitically and of course on the chart. Having said all of this, short-term opportunities will probably present themselves from time to time.
Written by FX Empire