AUD/USD Forecast: Aussie tumbles on risk aversion, likely to challenge 0.6600

Matías Salord FXStreet

AUD/USD Current Price: 0.6618

US Dollar soars on risk aversion, even as US yields drop.
Aussie under pressure ahead of Australian inflation data.
AUD/USD drops to one-month lows, risks tilted to the downside.

The AUD/USD tumbled on Tuesday, having the worst day in weeks. The pair dropped from near 0.6700 to 0.6618 and posted the lowest daily close in a month. A deterioration in market sentiment boosted the US Dollar while the Australian dollar lagged. AUD/NZD dropped for the third consecutive day, hitting weekly lows under 1.0800.

The Aussie started to slide during the Asian session as Iron One prices fell. The decline in commodity prices weighed on the currency. Later, it was risk aversion that pushed AUD/USD further lower. Wall Street indices fell by over 1%, and US yields were lower.

On Wednesday, Australia will report Q1 and March inflation. The Consumer Price Index (CPI) is expected to slow from 7.8% YoY to 6.9% in the first quarter and from 6.8% to 6.6% in March. Numbers aligned with expectations could bolster forecasts for the Reserve Bank of Australia (RBA) to keep interest rates unchanged next week, as it did in the April meeting. A surprise with higher numbers could trigger a rally in the Aussie. However, it could be short-lived if market conditions worsen.

AUD/USD short-term technical outlook

On the daily chart, the outlook for the AUD/USD looks negative after the sharp decline and the consolidation below the 20-day Simple Moving Average. A daily close under 0.6630 also adds to the negative outlook for the Aussie. A recovery above 0.6710 would alleviate the pressure.

Technical indicators on the 4-hour chart turned dramatically south. The Relative Strength Index (RSI) is below 30 at oversold levels. While under 0.6625, more losses seem likely. The following support is at the 0.6600 area; below attention would turn to the March low around 0.6560. Rebounds to the 0.6670 area could be seen as opportunities for new shorts; however, if the pair rises above, the Aussie should strengthen.

Support levels: 0.6600 0.6560 0.6530
Resistance levels: 0.6670 0.6710 0.6740

View Live Chart for the AUD/USD

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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