AUD/USD Forecast: Chopping Around Without Direction

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The Australian dollar continues to go back and forth during the trading session on Friday, as we are testing the 0.6775 handle. However, this is a market that is somewhat listless as the Australian dollar so highly levered to the Chinese economy. With the US/China trade war going on, it makes sense that the Australian dollar will be so noisy. At this point I don’t think it’s likely to see a significant move in one direction or the other, and therefore it’s simply a waste of time to be trading at right now. That being said, there are longer-term potential trade setting up.

Underneath at the 0.67 level is likely going to offer a bit of a “floor” in the market, but we need to see that level hold. If we bounce from here, that’s an even better sign for the buyers but we need good news out of the US/China trade situation in order to get the Australian dollar going to the upside. The RBA looks likely to be dovish with their monetary policy, so you’re not going to get any help from Sydney.

All things being equal, I believe that we are trying to build up a base in order to turn around for a bigger move, but that being said it is a long process to do this, so it would not surprise me at all that the market simply chop around for the next couple of weeks. Eventually though, if we can break above the 200 day EMA it’s possible that the trend change will be confirmed for most people, and the Aussie will go looking towards the 0.71 handle, and then possibly even the 0.75 level. However, it’s not until we get a US/China trade deal that you can take any rallies in the Australian dollar with more than a grain of salt. That being said, if we were to break down below the 0.67 handle, it opens up the door to the 0.65 level. Below there, things get rather ugly and it would probably be due to some type of major financial crisis. While the global growth situation has been a bit tired lately, the reality is that we aren’t on the verge of some type of major collapse, so I certainly think that the real risk of the longer-term is to the upside. With that, I am cautiously optimistic but realize that I probably have an age to make this move.

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Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.