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The Wednesday session is going to be a lot of noise, but by the time we get through with it, we might have a bit more clarity as to where we go next.
- The AUD/USD pair tried to rally during the early hours of Tuesday but then fell as the 50-day EMA continues to see a lot of interest.
- Furthermore, we have the 0.70 level above that could offer quite a bit of psychological resistance as well.
- The market has been rather noisy over the last several days, as it looks like we are trying to decide what to do about the Federal Reserve.
- By the end of the day on Wednesday, we should have some answers.
Expecting Downward Pressure
As the Fed is likely to do at least 75 basis points for the rate hike, it certainly could put a lot of downward pressure on this market. Breaking down below the hammer that we had formed during the trading session on Tuesday could open up quite a bit of negativity, sending the market down to the 0.68 level. After that, then we will more likely than not test the 0.67 level underneath. Breaking down below there then opens up the floodgates to a much lower level.
Having said that, if the Federal Reserve were to shock people and sound a bit more dovish, then it’s possible that we could be looking at a scenario where we have the market take off to the upside. In fact, that could cause a certain amount of panic. At that point, we could see the market break above the 0.7050 level, but I think it would take quite a bit of momentum to make that happen. In the short term, it’s very likely that we continue to see a lot of noisy behavior, so I think it’s only a matter of time before we have to make a bigger decision.
Keep in mind that the Australian dollar is very highly levered to commodities, sp it makes quite a bit of sense that we would see the market go back and forth, perhaps showing signs of indecision as we are seeing so many different movements in various commodities at the moment. Ultimately, I think this is a situation where we are more likely to go lower than higher, but keep in mind that the Wednesday session is going to be a lot of noise, but by the time we get through with it, we might have a bit more clarity as to where we go next.
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