AUD/USD chopped sideways on Thursday as traders weighed a strong US dollar against the Australian dollar's link to gold and commodities. DailyForex analyst Christopher Lewis flags 0.70 and 0.68 as levels that could become targets, with the pair sitting just above its 200-day EMA.
The Australian dollar moved back and forth through Thursday's session, chopping sideways as the market tried to work out its next move, according to DailyForex analyst Christopher Lewis. Lewis frames the broader backdrop as a strong US dollar that probably keeps its footing. The Australian dollar sits apart from many peers, though, because it is so heavily tied to gold and commodities — which he argues could make it a fulcrum for forex behavior if US dollar buying hesitates.
Middle East headlines keep the dollar in demand
Confusing headlines out of the Middle East remain a major issue, and Lewis says the resulting uncertainty makes the US dollar more appealing. He notes that most traders believe the United States is likely to raise interest rates, and with energy inflation still a problem, he argues that expectation makes even more sense.
But Lewis reads the conflict's participants as getting a bit exhausted. He suggests the potential for war is starting to diminish despite a few strikes over the last couple of days — a shift that, if it holds, could change how markets behave in general.
Rate worries and commodities keep the pair in focus
The biggest concern, Lewis says, is whether interest rate markets keep behaving the same way, with a rush to the dollar built on the idea that inflation is coming down the road. He points out that other central banks have suddenly been priced in for rate rises too, which signals to him that markets stay chaotic.
That keeps the Australian dollar in focus, given its heavy exposure to gold and other commodities that respond to interest rates and inflation. On the chart, Lewis flags the pair sitting just above its 200-day EMA as a point of importance.
The levels that matter
A break to the upside puts the 0.70 level in play as a target, while a break below the 200-day EMA opens the way toward 0.68. For now, Lewis reads the pair as waiting on some external factor to get it moving, and he expects it to follow the US dollar more than anything specific to the Australian side.
Source: DailyForex
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