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Australian Dollar Technical Forecast: AUD/USD, AUD/JPY, GBP/AUD

Australian Dollar Technical Forecast: AUD/USD, AUD/JPY, GBP/AUD

2019-10-26 16:00:00
Rich Dvorak, Junior Analyst
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AUSTRALIAN DOLLAR WEEKLY TECHNICAL FORECAST: AUD/USD, AUD/JPY, GBP/AUD

  • Australian Dollar price outlook for next week is mixed with the Aussie still in search of bullish conviction to confirm its recent uptrend
  • A swath of fundamental event risk scheduled throughout next week brings spot AUD/USD, AUD/JPY and GBP/AUD price action into focus
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The Australian Dollar has enjoyed an impressive rally so far this month against most counterparts which has raised the question amongst forex traders whether the Aussie has officially put in a bottom and begun to trend higher. Also, the back and forth in risk trends, which widely drives the Australian Dollar, has fostered indecisiveness and trapped AUD price action in a broad trading range since late July.

Yet next week’s barrage of high-impact event risk (detailed on the DailyFX Economic Calendar) could provide the Australian Dollar with a much-needed catalyst to propel it out of the multi-month range or spark that accelerates a sustained pullback. That said, here are the key technical levels to watch on AUD/USD, AUD/JPY and GBP/AUD.

AUSTRALIAN DOLLAR PRICE OUTLOOK FOR AUD/USD: NEUTRAL

Spot AUD/USD prices pivoted lower last week after printing its highest mark since September 16, which underscored a major zone of technical confluence around 0.6850-0.6900 that currently serves as an intimidating resistance level. This price ceiling is underpinned by AUD/USD’s mid-point retracement of its July 18 high to the October 02 low and happens to roughly align with the swing lows recorded in May and June.

AUD/USD PRICE CHART: DAILY TIME FRAME (APRIL 15, 2019 TO OCTOBER 25, 2019)

AUDUSD Price Chart Technical Forecast

Another noteworthy area of technical resistance for the spot AUD/USD is the 1-week options implied upper band of 0.6885, which I outlined in the latest US Dollar Price Volatility Report. Though the Australian Dollar’s recently formed uptrend identified by the series of higher lows and higher highs since bottoming at its year-to-date low of 0.6671 could provide the Aussie with a positive tailwind for trend continuation. The upward-sloping 20-day and 50-day simple moving averages that rest near the 0.6800 handle provide an additional layer of technical support for AUD/USD. Confluent support below this area is noted by the 23.6% Fibonacci retracement level near 0.6770.

AUSTRALIAN DOLLAR PRICE OUTLOOK FOR AUD/JPY: NEUTRAL

AUD/JPY’s technical backdrop is quite similar to that of AUD/USD given the Japanese Yen’s and US Dollar’s posturing as safe-haven currencies while the Australian Dollar is perceived to rest on the opposite end of the risk spectrum. Though unlike AUD/USD, the month-to-date high in spot AUD/JPY surpassed its September top which is constructive development for AUD/JPY bulls.

AUD/JPY PRICE CHART: DAILY TIME FRAME (MAY 08, 2019 TO OCTOBER 25, 2019)

AUDJPY Price Chart Technical Forecast

The Australian Dollar’s recent rally ran a little hot and has begun to drift lower, however, following a rejection at technical resistance highlighted by the 76.4% Fib of AUD/JPY’s trading range since July and the RSI rising edging back from ‘oversold territory.’ Nevertheless, AUD/JPY could find technical support near its 61.8% Fibonacci level and mid-point retracement, which happens to align closely with the currency pair’s rising 20-DMA and 50-DMA.

AUSTRALIAN DOLLAR COULD BE DRIVEN BROADLY BY VOLATILITY (OR LACKTHEREOF)

Australian Dollar Price Chart Outlook Driven by Risk Trends

Chart created by @RichDvorakFX with TradingView

The generally negative correlation between the Australian Dollar and the VIX Index could serve as a technical tool to help traders determine the Aussie’s broader direction. If the latest influx of risk appetite – quantified by the recent nosedive in the VIX Index – lingers into next week and is fundamentally warranted, forex traders could see a topside breakout in spot AUD/USD and AUD/JPY. On the contrary, an abrupt reversal higher in volatility and move toward risk aversion, which will likely be reflected by an aggressive surge in the VIX Index, could send the Australian Dollar plunging lower against its safe-haven counterparts.

AUSTRALIAN DOLLAR PRICE OUTLOOK FOR GBP/AUD: BEARISH

While the Australian Dollar has a relatively strong inverse relationship with volatility as illustrated above, spot GBP/AUD stands to be driven primarily by the latest Brexit developments. Interestingly, rising Brexit uncertainty could present an attractive opportunity for GBP/AUD bears when also considering the currency pair’s technical picture.

GBP/AUD PRICE CHART: WEEKLY TIME FRAME (JULY 03, 2016 TO OCTOBER 25, 2019)

GBPAUD Price Chart Technical Forecast

Looking at a weekly GBP/AUD price chart brings to focus its ascending channel pattern seemingly etched out since mid-2016. That said, rising trendline resistance connecting the swing highs over the last 3 years could send GBP/AUD ricocheting lower. Moreover, the Bollinger Band suggests that spot GBP/AUD prices might be overextended and due for a reversal as the currency pair is 2-standard deviations above its 20-week moving average, though an eruption of Brexit optimism will likely trump this threat.

-- Written by Rich Dvorak, Junior 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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