AUD/USD Price Forecast: Aussie Falls to 17-Year Low, Where's the Bottom?
- AUD/USD traded significantly lower on Wednesday as risk aversion reignited and FX volatility soared
- Consequently, the pair rests at a 17-year low, trading around the 0.5765 level
- Despite the depth of its recent decline, there is little to suggest AUD/USD has bottomed
AUD/USD Price Forecast: Aussie Falls to 17-Year Lows, Where's the Bottom?
The Australian Dollar suffered another drastic decline versus the US Dollar Wednesday as risk aversion reignited, and volatility remained perched at historic levels. As a result, AUD/USD fell to its lowest point since January 2003 as it plummeted beneath the round 0.60 mark. Devoid of recent price action, technical analysts are left with little to work with in the last two decades.
AUD/USD Price Chart: Monthly Time Frame (November 1997 – March 2020)
Consequently, technicians will have to turn to price action in the early 2000’s when AUD/USD traded near its all-time low of 0.4745. Despite hints that sentiment had improved, and risk appetite may return, it seems investors remain apprehensive about the standing of commodities and commodity-sensitive currencies like the Australian Dollar, Canadian Dollar and Norwegian Krone.
Not to be outdone, however, the British Pound also experienced a loss of gravity Wednesday in a sign Dollar-denominated liquidity was at a premium. Whatever the driving factor going forward may be, the debilitating drop in crude oil prices and other commodities will remain a significant headwind for the corresponding currencies and could see AUD/USD weakness continue.
Therefore, potential support around 0.5465 and 0.5237 may come into play. Further still, IG Client Sentiment Data reveals retail traders are confident AUD/USD is destined higher, a sign weakness may in fact persist. With few reasons to suggest the Aussie has bottomed, it would be imprudent to propose the Aussie’s standing will substantially improve until there is a material improvement in sentiment in the broader market.
--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.