AUD/USD Forecast: Stabilizes but Looks Bearish Nonetheless

• The AUD/USD has rallied slightly during Wednesday's trading session, but it's more likely an opportunity to sell this pair at the first signs of exhaustion.
• During Tuesday's session, Jerome Powell suggested that the Federal Reserve may have to increase the rate of interest rate hikes going forward, which shocked the market.
• This situation is more a matter of hope than reality, as many large fund managers were expecting the Federal Reserve to loosen monetary policy.

If the market breaks down below Wednesday's trading session lows, it's possible that it could flush much lower, perhaps down to the 0.64 level. The Australian dollar will continue to move with risk appetite, and if risk appetite suddenly lacks, it makes sense that we would see the US dollar strengthened overall. Additionally, the Australian dollar is heavily influenced by commodities and global risk appetite. If the global economy is starting to slow down, we would see demand for Australian commodities drop.

Looking to Sell the Pair At The First Signs of Exhaustion

There are also questions about the China reopening play, which might be struggling, and therefore the Australian dollar could struggle as well. The size of Tuesday's candlestick suggests that there could be some follow-through in the market. Either way, it's not a good idea to buy the Australian dollar anytime soon, at least not until it breaks above the 0.68 level, which is the top of the major consolidation region that was just busted out of. Furthermore, the "death cross" happened recently, and longer-term traders may look at that as a reason to get involved in the short side.

The Australian dollar has rallied slightly during Wednesday's trading session, but it's more likely an opportunity to sell this pair at the first signs of exhaustion. Jerome Powell's suggestion of potential rate hikes shocked the market, which was hoping for the Federal Reserve to loosen monetary policy. If the market breaks down below Wednesday's lows, it could flush much lower. The Australian dollar moves with risk appetite and is heavily influenced by commodities, making it vulnerable to global economic slowdowns. It's not advisable to buy the Australian dollar anytime soon, and longer-term traders may look at the "death cross" as a reason to get involved on the short side. Ultimately, I do think that we can probably drop pretty significantly, so therefore I don’t trust rallies at this point in time.