Finds Buyers on the Dip

Keep in mind that the Australian dollar is highly sensitive to China, which of course is reopening. 

• The AUD/USD has initially fallen during the trading session on Tuesday but found the buyers underneath to turn things around.
• Alternatively, everybody is paying close attention to the Federal Reserve meeting over the next 2 days, and perhaps more importantly, the press conference afterward.
• While we certainly will have some type of interest rate hike, I think it’s the overall tone of Jerome Powell during the question-and-answer session that will be the next major catalyst.
• After that, we have the jobs number on Friday so there are a couple of different reasons to think that the US dollar could be rather noisy.

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If we were to break down below the bottom of the candlestick for the day, then it’s likely that we go down to the 0.69 level. The 0.69 level has been important a couple of times, and you can see that I have a line drawn as a result. The 50-Day EMA sits just above the 200-Day EMA, forming the golden cross indicator, one that a lot of people like the idea of buying and holding this asset. I don’t necessarily subscribe to that, but it is something to keep in the back of your mind.

I Expect a Lot of Choppiness

The fact that we formed a hammer shows that there is a lot of interest in buying dips, and a lot of people still believe that the US dollar is going to continue to lose ground. On the other hand, the market is likely to see a wild move after the FOMC meeting on Wednesday, so therefore it’s interesting to see how we move next. If we can break above the 0.71 handles, then it’s likely that we could go to the 0.72 level after that. Anything above that area will then open up the possibility of a huge move to the upside for the longer term.

Keep in mind that the Australian dollar is highly sensitive to China, which of course is reopening. That might be part of the reason we see so much strength, or perhaps it’s the fact that inflation numbers have recently been hotter than expected in Oz. Ultimately, I expect a lot of choppiness in this range for the next 24 hours, but by the end of the Wednesday session, we should have a little bit more in the way of clarity.

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