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AUD/USD Climbs, US Dollar Drops Ahead of the Fed & GDP Data

AUD/USD Climbs, US Dollar Drops Ahead of the Fed & GDP Data

Rich Dvorak, Analyst

US DOLLAR FORECAST: AUD/USD PRICE ACTION AT RISK OF REVERSAL, FED MEETING & FIRST QUARTER GDP DATA ON DECK MIGHT BOOST SAFE-HAVEN DEMAND

  • US Dollar has dropped over the last three-consecutive trading session as market participants put pressure on safe-haven currencies
  • AUD/USD price action extended gains to its strongest reading since March 11 driven by a recovery in trader risk appetite
  • DXY Index chart could ricochet higher off a critical technical support level if coronavirus concerns are rekindled by the FOMC update or 1Q-2020 US GDP data

The US Dollar has fallen 1% from Friday’s intraday high and declined for three-straight trading sessions. It seems the US Dollar suffers from a prevalent recovery in market sentiment and retracement in volatility. While this wave of coronavirus optimism has weighed negatively on safe-haven currencies like the US Dollar, it appears to have benefited the pro-risk Aussie and spot AUD/USD price action.

In light of the economic calendar, however, we may soon experience another aggressive shift in trader demand for safe-haven assets. The intimidating lineup of event risk over the next 24-hourscould potentially inject a fresh dose of pessimism, and rekindle currency volatility, which might provide a marked boost to the US Dollar.

The upcoming release of first quarter GDP data from the United States is expected Wednesday, April 29 at 12:30 GMT. The Federal Reserve is also scheduled to provide markets with a monetary policy update later that day at 18:00 GMT. US Dollar Index outlook for the short-term remains fixated on these two high-profile and often market-moving events.

US DOLLAR – DXY INDEX PRICE CHART: DAILY TIME FRAME (26 DECEMBER 2019 TO 28 APRIL 2020)

DXY Index Price Chart US Dollar Forecast Fed Meeting 1Q 2020 GDP Report

Chart created by @RichDvorakFX with TradingView

US Dollar price action has potential to catch a bid if 1Q-2020 US GDP misses market estimates and prompts a risk-off market response, which, in light of the uncertainty that surrounds economic fallout from the coronavirus pandemic, is a material possibility.

The US Dollar may struggle to benefit from a poor GDP report, however, considering gross domestic product data is backward-looking. Potential upside in the US Dollar might also lack initial follow-through with the anticipated update from FOMC officials still outstanding.

In turn, the US Dollar could struggle to find direction and keep the broader DXY Index anchored to the key level of technical confluence around the 100.00 price zone. This may provide possible range trading opportunities with technical support and resistance residing near the 100.80 mark and 50-day simple moving average, respectively.

AUD/USD PRICE CHART: DAILY TIME FRAME (26 DECEMBER 2019 TO 28 APRIL 2020)

AUDUSD Price Chart US Dollar Forecast Technical Analysis

On that note, spot AUD/USD price action, which generally reflects market sentiment and risk appetite in real-time, might serve as a bellwether to where the broader US Dollar and DXY Index head next. The Aussie-Dollar could struggle to extend its impressive advance since its March 18 swing low as the major currency pair runs into technical resistance posed by its upper Bollinger Band.

A breakdown below the positively-sloped trendline connecting the series of higher highs could cause a reversal to accelerate toward the 0.6300 handle. Conversely, the 61.8% Fibonacci retracement of the bearish leg recently recorded by AUD/USD could keep spot prices bolstered.

Keep Reading – US Dollar Forecast: Fed, Coronavirus Guidelines & Earnings Eyed

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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