Australian Dollar Price Forecast: AUD/USD Rebounds, but Remains Weak Ahead of RBA
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Australian Dollar Price Outlook:
- AUD/USD has suffered further losses after falling beneath support at 0.67 two weeks ago
- Critically, the OECD released a downgraded global growth forecast that could crimp AUD gains
- IG Client Sentiment Data reveals retail traders are confident the bottom has been established
AUD/USD Rebounds but Remains Vulnerable Ahead of RBA
The Australian Dollar has enjoyed a modest rebound to start the week, reclaiming the 0.65 level after suffering a string of losses in the last two months. Other risk-sensitive assets enjoyed similar recoveries on Monday as stocks drove higher and the VIX retreated from two-year highs. Still, the Australian Dollar may not be out of the woods as the global growth outlook grows increasingly bleak.
AUD/USD Price Chart: Daily Time Frame (January 2019 – March 2020)
Further still, an extended AUD/USD recovery will have to negotiate a series of technical barriers that now reside narrowly overhead. To that end, 0.66 may give rise to modest indecision before confluent resistance around 0.67 is called into play. While the longer-term strength of the Australian Dollar is vulnerable, the pair in focus currently resides in oversold territory and the upcoming Reserve Bank of Australia rate decision could spark volatility, especially given the recent shift in rate cut odd probabilities.
On February 20, the expectations of a 25-basis point rate cut at the March 3 RBA meeting stood at just 5%. Following a precipitous decline in risk assets and an increasingly troubled global growth outlook, the odds leading into the event now sit at 109% at the time of this article’s publication. Evidently, the market has shifted expectations for the event significantly and the resultant volatility – if it materializes – could drive AUD/USD through major levels.
Therefore, if the RBA does not reduce its Cash Rate Target or offer commentary that suggests a rate cut is in the immediate future, AUD/USD may look to test 0.6700 in the days ahead as investors grapple with the relatively hawkish outcome. While the immediate future for AUD/USD is difficult to determine given the looming event risk, IG Client Sentiment Data reveals retail traders are overwhelmingly net-long which could suggest further weakness down the line.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.