The Australian dollar exploded to the upside during the day on Wednesday, in anticipation of the Federal Reserve meeting announcement. While an interest rate hike is expected out the United States, the market is starting to bet that with the weaker than anticipated inflationary numbers earlier in the day that the Federal Reserve may be a bit hesitant to continue to raise interest rates. That is part of what the markets are starting to focus on, and that is very dollar negative. The Australian dollar is also very sensitive to gold, so as the dollar loses value, the market should continue to show quite a bit of volatility but with an upward pressure. Nonetheless, there are a lot of things that could happen between now and the end of the move to make this market very active.
Buying dips
I think the buying dips will probably be what in the end works out best for longer-term traders. Short-term traders will probably do the same but they will be much quicker to get out of the market. I believe that this market will go looking for the 0.80 level, especially if the Federal Reserve looks to be a bit more dovish than anticipated previously. Economic indicators are starting to slow down, but the Federal Reserve has not explicitly said that they are concerned. So, with that it’s a little bit of a 50-50 trade currently, but a break above the highs of the day certainly suggest that we are going higher. If we were to break down below the 0.75 level, that completely changes everything and as his pair falling quite drastically in my opinion. Either way, be very careful as this market should continue to be volatile under almost all circumstances that I can see.
Written by FX Empire