AUD/USD Forecast: Technicals show positive signs but Aussie could suffer amid risk aversion
|Current Price: 0.6597
- Stocks suffer worst slide since 2011, but Aussie manages to bounce versus US dollar.
- AUD/USD rises back to the 0.6600 area from multi-year lows amid extreme volatility that should persist.
- Chinese inflation data on Tuesday to be ignored.
Another wild day in markets with losses for stock prices not seen in years. The risk aversion initially pushed commodity currencies sharply lower versus the US dollar but later, they rebounded. Lower US yields weakened the demand for the greenback and helped AUD/USD not only to recover, but it even printed two-week highs. Later it pulled back, ending the day modestly lower. Risk aversion will likely continue to limit rallies on AUD/USD. In the case of more declines in equity markets, the Aussie should have difficulties staging a move to the upside like what it did on Monday. Concerns about the global growth outlook on the back of the coronavirus and the collapse in confidence after Monday’s sell-off are not positive factors for the pair in the short-term. On Tuesday, during the Asian session, inflation data from China is due. Those numbers are not expected to have a significant influence offset by ongoing events.
AUD/USD Short-term technical outlook
From Monday’s Asian session low, the AUD/USD rose more than 300 pips. It traded above the 0.6670 resistance area but it failed to hold on top and pulled back. Technical indicators after the sharp bounce show some strength in the Aussie but for it to materialize, it needs to break and consolidate above 0.6650/70. For the next hours, the immediate support is located at 0.6580 while below that level, emerges 0.6540. A slide under 0.6540 would leave the pair exposed to more losses.
Support levels: 0.6570 0.6505 0.6430
Resistance levels: 0.6650 0.6685 0.6750
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