AUD/USD Forecast: Aussie Dollar Starts to Roll Over Finally

The Aussie has been overbought for a while, so I think a little bit of a recovery does make a certain amount of sense.

  • The Australian dollar has been overbought for some time, and therefore a little bit of a pullback makes quite a bit of sense.
  • The 0.71 level above is an area where we’ve seen some resistance, and even pullback from the 200-Day EMA at that point.
  • Furthermore, we have the Federal Reserve meeting this week, and traders will have to try to take in the idea of what the Federal Reserve is going to do next.

Market Awaits FED Announcement

After all, there has been quite a bit of noise and nonsense about the idea of what the Federal Reserve Chairman will say. The 50-Day EMA is getting ready to break above the 200-Day EMA, forming the so-called “golden cross”, which of course is a very bullish technical indicator. Nonetheless, I don’t necessarily think that’s going to be a major factor, because everything is going to come down to just how aggressive Jerome Powell is when it comes to talking about keeping tight. Furthermore, we have to worry about the overall health of the economy in the world, and if the Federal Reserve remains very tight, it will almost certainly cause a recession in the United States, and then of course the rest of the world.

If we were to turn around a break above the 0.71 level, then it’s likely that we could go to the 0.72 level. However, this is a market that I think continues to be very noisy and choppy in the next couple of sessions, and therefore I’m not overly excited about any bullish move. If we do break down from here, we could go down to the 0.70 level rather quickly, and then perhaps down to the 0.6850 level. Either way, you are going to have to pay attention to not only the Federal Reserve, but also what’s going on in China, because the Australian dollar and the Australian economy are highly levered to what’s going on in China.

The only thing I think you can count on right now is a lot of volatility, and of course erratic behavior. The Aussie has been overbought for a while, so I think a little bit of a recovery does make a certain amount of sense. The market will almost certainly see choppiness, but by the end of the week we should have a little bit more in the way of clarity.

AUD/USD chart

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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.