AUD/USD: AUSTRALIAN DOLLAR REBOUNDING OFF 2009 LOWS AS CORONAVIRUS CONCERNS WANE
- The Australian Dollar took a 5% nosedive to start the year, but the Aussie could be on the cusp of a broader reversal higher amid a revival of risk appetite
- Spot AUD/USD appears oversold after recording a near-vertical drop over the last month and a half to its lowest level since March 2009
- AUD price action has begun to rebound and could extend its bounce higher so long as market volatility and coronavirus concerns continue to abate
AUD/USD is starting to show signs that an intermittent bottom might be in. The Australian Dollar has been pressured lower over the last several trading days as traders sell risk owing to doubts over expectations for a notable rebound in global GDP growth this year.
| Change in | Longs | Shorts | OI |
| Daily | -3% | -2% | -3% |
| Weekly | 3% | 15% | 6% |
Economic activity has been under pressure in China – the world’s second largest economy and Australia’s largest trading partner – with most of China on lockdown in aims of curbing the recent coronavirus outbreak.
AUD/USD PRICE CHART: DAILY TIME FRAME (AUGUST 2019 TO FEBRUARY 2020)
Chart created by @RichDvorakFX with TradingView
This, coupled with a confluence of other bearish fundamental forces, have sank the Australian Dollar lower to its lowest level since the global financial crisis about a decade ago.
The massive selloff in AUD/USD could be subsiding, however, as downside momentum decelerates and the Aussie shows signs of beginning a broader rebound attempt.
Spot AUD/USD has eclipsed its short-term moving average – the 9-day EMA – and suggests the year-to-date downtrend might be over. Likewise, positive divergence indicated by the MACD and RSI is likely a welcomed technical development for Australian Dollar bulls.
A protracted bounce in the Aussie might unfold if spot AUD/USD can top technical resistance posed by the 0.6750 price level, which is highlighted by the 23.6% Fibonacci retracement of the December 31 intraday high recorded by the major currency pair.
AUD/USD PRICE CHART: DAILY TIME FRAME (APRIL 2019 TO FEBRUARY 2020)
Chart created by @RichDvorakFX with TradingView
Ebbing market volatility, driven largely by fading coronavirus fears, could also help facilitate the recovery of recent downside recorded by the Australian Dollar.
Yet the Aussie has potential to keep bleeding lower if the VIX and currency volatility suddenly spikes again, which will likely be matched by another selloff in AUD price action and move into safe-haven currencies.
Read More – USD Forecast: US Dollar Hinges on Virus Fear, Sentiment & Powell
-- Written by Rich Dvorak, Junior Analyst for DailyFX.com
Connect with @RichDvorakFX on Twitter for real-time market insight
