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Australian Dollar Forecast: AUD/USD Tests Support Ahead of RBA

Australian Dollar Forecast: AUD/USD Tests Support Ahead of RBA

2020-11-02 22:00:00
Rich Dvorak, Analyst

AUD/USD PRICE OUTLOOK: AUSTRALIAN DOLLAR PROBES KEY SUPPORT LEVEL AS RBA DECISION LOOMS

  • AUD/USD price action knocks on the door of 0.7000 once more ahead of the RBA decision
  • Australian Dollar bulls have defended this critical technical support level with fading conviction
  • The Aussie shows potential to continue carving out its bearish descending triangle pattern
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The Australian Dollar looks teed up for another turbulent week. AUD/USD implied volatility just clocked its highest reading since mid-June, but expectations for elevated market activity comes as little surprise when considering the plethora of event risk outlined on the economic calendar. The most prominent threat faced by the Australian Dollar will likely be the upcoming RBA decision due Tuesday, 03 November at 03:30 GMT. Potential for heightened AUD/USD price volatility this week also looks exacerbated by counterpart drivers such as the US presidential election.

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AUD/USD PRICE CHART: DAILY TIME FRAME (27 MAY TO 02 NOV 2020)

AUDUSD Price Chart Australian Dollar Technical Forecast

The Reserve Bank of Australia recently conveyed an increasingly dovish tilt regarding its monetary policy stance, which helped fuel Aussie selling pressure as market participants priced in expectations for a 10-basis point interest rate cut. According to overnight index swaps, the probability that the RBA cuts its policy interest rate this week currently stands at around 80%. Confirmation of this expectation could send AUD/USD price action snapping back to the 0.7000-level.

AUD/USD BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -13% -6%
Weekly 14% -8% 1%
What does it mean for price action?
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That said, Australian Dollar bulls might continue to defend this critical technical support zone considering RBA dovishness appears largely priced in. The Aussie also seems to be finding buoyancy provided by its bottom Bollinger Band. Correspondingly, it seems most likely that the Aussie-Dollar will continue to carve out and oscillate within the confines of its bearish descending triangle pattern. If AUD/USD bears breach the 0.7000-price level, however, there could be potential for selling pressure to accelerate toward the 200-day simple moving average.

Keep Reading: US Dollar Forecast: Technical Levels to Watch as Election Looms

-- 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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