The Australian dollar has recently been confined within a well-defined consolidation range between 0.68 and 0.66. However, over the past few weeks, volatility has intensified dramatically. The market witnessed a sharp plunge below the bottom of the consolidation range, followed by a swift rally above its upper boundary, only to experience subsequent pullbacks.Given the heightened volatility, it is crucial to approach trading the Australian dollar with caution.
The Reserve Bank of Australia recently surprised the market by raising interest rates by 25 basis points. However, it is important to recognize that Australia remains highly dependent on global demand for its hard commodities. This reliance is particularly significant in the Chinese economy, Australia's primary export market. Observing overall commodity prices can provide valuable insights into potential movements in the Australian dollar.
However, the market must reveal its intentions before a definitive forecast can be made. I maintain a highly neutral stance on this currency pair, acknowledging the risks inherent in such a volatile environment. On Tuesday, the Australian dollar experienced a hesitant trading session, retracing initial gains and reflecting the prevailing volatility. Resistance near the 50-Day EMA and the presence of the 200-Dayin the vicinity contribute to increased market turbulence. Given the current environment, traders must exercise caution and protective measures when engaging with the Australian dollar.