The AUD/USD pair attempted to gain ground at the outset of Thursday’s trading session, but subsequently declined significantly. AUD/USD currently presents notable trading challenges, primarily because the Reserve Bank of Australia is expected to continue with rate hikes in the future. At the same time, AUD/USD remains highly sensitive to shifts in global risk appetite.
Given the current developments in the Middle East and the broader economic turbulence, it is reasonable to expect continued volatility in AUD/USD. In such an environment, relying on technical analysis may be the most practical approach, as it simplifies decision-making. The 50-day EMA is presently positioned near the 0.6930 level in AUD/USD, suggesting that the area between 0.6930 and 0.69 could act as a support zone. If AUD/USD dips below that level, it could trigger a significant decline for a period of time.
Under current conditions, outlook on AUD/USD reflects a buy-on-the-dip mentality, at least for now. However, if downside pressure begins to build, the Australian dollar could weaken quickly, while other currencies may face even greater challenges. For this reason, AUD/USD remains a market worth monitoring closely. A potential bounce, combined with improved risk appetite, could push AUD/USD toward the 0.7150 level.
A break above 0.7150 in AUD/USD would indicate the potential for a larger upward movement. Although this may not be a pair I trade directly, AUD/USD can provide useful insights into strategies involving other commodity currencies such as the New Zealand dollar, while also offering guidance on the broader direction of the US dollar.