At the start of Monday's trading session, the Australian dollar experienced an initial decline before swiftly bouncing back and surging upward, hitting the 50-Day EMA and struggling with a major technical level. It's important to note that the area between 0.67 and 0.68 has been a crucial zone in recent history and breaking above the 0.68 level would be a significant achievement for the Aussie dollar.
Should the 0.68 level be breached, the first target would be the 200-Day EMA, which is just above it. Conversely, a turnaround at this point could see the market drop back down to the 0.67 level. Anything below Monday's massive candlestick would be highly negative, leading traders to sell aggressively. There are arguments for both a bearish flag and an ascending triangle formation, leaving retail traders somewhat confused and resulting in conflicting opinions.
It’s worth noting that the Friday session will feature the US jobs number, and that could have a major influence on what the Federal Reserve does going forward. While another interest rate hike of 25 basis points is expected out of Jerome Powell, it’s how long they will stay tight with monetary policy that can have a major influence on where global growth goes.
As the Australian dollar is highly sensitive to global growth, traders must closely monitor the commodities markets, which are responsive to traders' risk appetite and demand, which, in turn, is intertwined with global growth. The Australian dollar is also highly sensitive to the Asian markets and whether the economies are improving. As of now, the market appears to be in a "risk-on" attitude, but there is still a long way to go to completely alter the chart's overall appearance. We can expect a lot of choppy behavior going forward, which can be frustrating for most traders. Ultimately, traders must be cautious with their position sizes as this market can cause significant damage if not handled carefully. As long as the markets are as conflicted about Federal Reserve policy and global growth as they have been recently, caution is the better part of valor.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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