AUD/USD Forecast: Continues to Threaten a Breakdown Through Support

• The AUD/USD has gone back and forth during the trading session on Wednesday, as we continue to hang around the 50-Day EMA.
• It’s also worth noting that we are at the bottom of a major channel, and of course hanging around the crucial 0.67 level.
• This is an area that’s been important for a while, and the fact that we are just simply sitting here after forming a massive negative candlestick tells me that the market may have lost a bit of confidence as of late.

If we break down below the bottom of the candlestick from the Tuesday session, then I think there is a very real possibility that the Aussie starts to sell off again. In that scenario, I have the Australian dollar going down to the 0.65 level, an area that has been significant resistance previously. In fact, it was the “neckline” of an inverted head and shoulders which is now been fulfilled. Keep in mind that we are still in a longer-term downtrend, and that is something that should not be ignored. Beyond that, we also must keep in mind that there is a lot out there that suggests that the global economy is slowing down, and in that environment, the Australian dollar will continue to suffer as it is a proxy for a lot of industrial metals.

US Dollar is Probably Oversold

There seems to be a lot attached to the idea of the China reopening situation helping Australia, but if it does not go as smoothly as once thought, that could be a catalyst to drive the Aussie lower. Quite frankly, the US dollar is probably oversold at this point, just as it was overbought a couple of months ago. In this environment, I would not be surprised at all to see this pair fall, but you should also keep in mind that it is at the end of the year, and that means that we will probably continue to worry about liquidity, and therefore the moves will either be completely nonexistent, or erratic at best.

 I have a sneaking suspicion that by the 2^nd week of January, we may have quite a bit more clarity as to the directionality of the US dollar, and of course the Australian dollar. A tight monetary policy in the United States and global fears could continue to cause a bit of the ceiling near the 200-Day EMA.

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