The Aussie gave up early moves on Monday, as we are looking at this as a situation where we might be seeing some movement ahead of the RBA decision.
AUD/USD
The Aussie dollar tried to open the session on the right foot, but it did turn around and fall. After falling, it turned around and bounced a bit, but I think ultimately you have a scenario where you have to look at this through the prism of the market testing the 50-day EMA and failing.
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Furthermore, we have the Reserve Bank of Australia interest rate decision after the close and heading into the Tuesday session, so that could push the markets around. The RBA is expected to raise rates. It will be the guidance that gets people moving.
The overall consolidation
Ultimately, this is a market that I think probably tries to stay in this overall consolidation area. If we can break above the 0.7075 level, then I think the buyers come in and start to take it to the upside. A breakdown below the 200-day EMA, then you could see this market move to the 0.6933 level.
Ultimately, this is a market that I think probably tries to stay in this overall consolidation area that we have been in for basically all year, with the 0.6850 level underneath and the 0.7250 level above offering a top. All things being equal, this is a market that I think continues to see those areas tested going forward.
The interest rate differential will spread a little bit more toward Australia after this announcement, but still, it is not wildly stronger than the U.S. dollar, so that is not really the argument here. Furthermore, you have the Federal Reserve almost certainly raising rates in December. I think a lot of this comes down to guidance and playing the outer edges if and when you get to them.
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