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ASX 200 & AUD/USD Forecast: Risk Appetite Essential for Continuation

ASX 200 & AUD/USD Forecast: Risk Appetite Essential for Continuation

Peter Hanks, Strategist

AUD/USD & ASX 200 Price Outlook:

  • The ASX 200 pulled back this week as demand for risk assets waned
  • AUD/USD experienced similar price action as the two Aussie-based markets remain largely reliant on economic growth projections and risk appetite
  • With that said, both products may closely mirror broader risk trends as the week progresses

ASX 200 & AUD/USD Forecast: Risk Appetite Essential for Continuation

The Australian Dollar and ASX 200 have recovered considerably from their March lows as investors have seemingly come to terms with the unprecedented threat to the global economy. Still, uncertainty remains and the recent performances of Dow Jones and S&P 500 may suggest another bearish stint lower is on the horizon which would likely work to undermine AUD/USD and the ASX 200 simultaneously. With that in mind, outlining potential areas of support may prove useful should bearishness reemerge in the days ahead.

ASX 200 Price Chart: 4 – Hour Time Frame (February 2020 – April 2020)

ASX 200 daily price chart

In the case of the ASX 200, early assistance may be offered at the nearby Fibonacci level around 5,049 which may have played a role in stalling the decline earlier this week. With the current trading price not far from the first potential level, the Australian equity index could feasibly seek secondary support which may be provided by the low on March 23 around 4,380. Evidently, the ASX 200 is not afforded a lot of room to work with if selling pressure picks up in earnest - not only compared to US indices, but also AUD/USD.

AUD/USD Price Chart: 4 – Hour Time Frame (February 2020 – April 2020)

audusd daily price chart

To that end, AUD/USD might look to enjoy a bounty of technical support below the current spot price. First and foremost is the 61.8% Fibonacci level around 0.6236, followed by a horizontal trendline slightly beneath near 0.6200. Should the two initial levels fail to keep price afloat, subsequent support around the psychologically-significant 0.60 mark may be required.

While a retracement lower is far from certain, the two markets are undoubtedly sensitive to risk appetite which appears to be in a fragile state this week. If corporate earnings out of the United States continue to disappoint alongside other measures of economic productivity, investors may look to reduce growth-linked exposure in the form of the ASX 200 and AUD/USD.

--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.

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