AUD/USD Price Forecast – Australian Dollar Gives Up Early Gains
The Australian dollar has rallied initially during the trading session on Friday but gave back the gains as soon as we got close to the 0.71 handle. By doing so, the market looks like it is trying to tell us that there is trouble ahead, and therefore more of a “risk off” type of scenario. I believe at this point we will continue to see caution when it comes to the overall risk appetite around the world, and that of course has an effect on the Australian dollar, but perhaps even more importantly, the US dollar.
AUD/USD Video 28.09.20
The US dollar has been strengthening all week, but the Australian dollar will put up a bigger fight than many other currencies due to the fact that it has such a high correlation to the Chinese markets. After all, the Australian economy is highly levered to the Chinese economy, so that most certainly is something to pay attention to. With all of that in mind, I do think that we probably chop around in the short term, but a break down below the 0.70 on a daily close should not be ignored. That could very well lead to bigger losses, and I suspect that you will probably see the US dollar strengthening against everything at the same time if that is happening.
The Aussie has been somewhat insulated from a lot of the noise until recently, so whether or not we are going to play “catch-up” of course is an open question. I think at this point it is obvious that we have the potential for a big move, so it most certainly will need to be patient and wait for the correct breakdown. On the other hand, if we break above the 0.71 level it is likely we go back towards the highs again.
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This article was originally posted on FX Empire
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