AUD/USD Forecast: Aussie Stabilizes After Move Lower

Christopher Lewis

I believe it is only a matter of time before the market breaks out, so I will look at every rally as an opportunity, as the momentum to the downside has most certainly picked up quite a bit of velocity.

The Australian dollar went back and forth on Tuesday as we continue to see this market as one that favors the downside, but we may be a little overdone in the short term. Because of this, do not be surprised at all to see some type of bounce, but that bounce for me will be a nice selling opportunity. The Aussie dollar will continue to suffer at the hands of the greenback, because the greenback is outperforming almost everything. The Aussie dollar will not be any different, especially as it is so highly tied to the commodity markets, which are all over the place right now.

The Reserve Bank of Australia has sounded very dovish as of late and suggested that the tapering of bond purchases might be a while away, so it certainly makes quite a bit of sense that we would see this pair go looking towards the 0.70 level underneath. The 0.72 level underneath is short-term support, but I do think it is only a matter of time before we break down below that level. Rallies at this point in time will be looked at through the prism of selling opportunities, and the possibility of picking up “cheap US dollars.”

As far as buying is concerned, I have no interest in doing so until we break above the 200-day EMA, which currently sits at the 0.7415 handle. Breaking above that level could open up the possibility of an attempt to break above the 0.75 handle, perhaps even the 0.76 level. Anything above there would change the overall longer-term trend, and we are a significant distance from that happening. I believe it is only a matter of time before the market breaks out, so I will look at every rally as an opportunity, as the momentum to the downside has most certainly picked up quite a bit of velocity. Furthermore, you have to pay close attention to the fact that the Chinese mainland in the last couple of months have shown signs of problems. The markets might be noisy to say the least, but they still favor quite a bit of the negative pressure coming out as the Federal Reserve is one of the few significant central banks out there looking to taper bond purchases, thereby tightening monetary policy.

AUD/USD

Christopher Lewis

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.

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