AUD/USD Forecast: Bears dominate the scene, not everything is set and done

Valeria Bednarik FXStreet

AUD/USD Current Price: 0.6781

Concerns about Chinese economic growth weighed on the market sentiment.
The Reserve Bank of Australia considered pausing rate hikes in June.
AUD/USD could extend its decline towards a critical Fibonacci support level at 0.6730.

The AUD/USD pair fell sharply on Tuesday, trading as low as 0.6752 to finally settle in the 0.6780 region. The Aussie plummeted during Asian trading hours following the release of the Reserve Bank of Australia (RBA) meeting Minutes. The document showed that Broad discussed two options, either increasing the cash rate by 25 basis points (bps) or holding it unchanged. Arguments were “finely balanced,” but policymakers ended up opting for a hike amid increased risk inflation would take longer to return to target than had been expected.

Concerns about Chinese economic progress also affected the market’s mood, leading to increased US Dollar demand and pushing the pair further south. The Greenback further advanced with better-than-anticipated US data and as Wall Street returned from the long weekend posting sharp losses.

Australia will publish the May Westpac Leading Index on Wednesday at -0.03%.

AUD/USD short-term technical outlook

The AUD/USD pair trades below the 23.6% retracement of its latest daily run at 0.6795, and technical readings in the daily chart suggest the decline may continue, particularly if sellers decide to defend the Fibonacci level. The daily chart shows that the pair continues to develop above all its moving averages, yet technical indicators retreat sharply from overbought readings, supporting a continued decline towards the 38.2% retracement at 0.6730.

In the near term, and according to the 4-hour chart, the pair is trading below its 20 Simple Moving Average (SMA), which gains bearish traction at around 0.6840, although above the 100 and 200 SMAs, both far below the current level. Technical indicators, in the meantime, consolidate near oversold readings, skewing the risk to the downside without confirming the next directional movement.

Support levels: 0.6830 0.6795 0.6750

Resistance levels: 0.6870 0.6905 0.6940

View Live Chart for the AUD/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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