The main trend remains bearish for AUD/USD

AUD/USD Unable to Overtake the 200 Daily SMA

Posted Sunday, March 26, 2023 by
Skerdian Meta • 2 min read

AUD/USD has shown shown volatility this week, with resistance encountered between 0.6720-30 for most of the week. On Wednesday and Thursday, buyers tried to push the price up due to volatility caused by the FED rate decision, which markets considered as a dovish hike, which sent the USD lower.

This upward price action managed to surpass the midpoint of the decline from the February 20 high at 0.67417 and reached the falling 200 daily moving average (purple) at 0.6760, which is a crucial level, but buyers failed to push the price above that.

The 200 SMA held as resistance once again and the price began to decline yesterday and broke below two significant swing areas: between 0.67239 and 0.67296 and between 0.6691 and 0.67036. The decline stopped on Friday evening but the low reached was 0.6625.

The USD Index, which measures the US dollar’s value against a basket of currencies, continued to rise strongly after bouncing back from a seven-week low on Thursday due to a significant drop in equity markets, as disappointing manufacturing PMI data from both the Eurozone and the UK raised concerns about the risk of a looming recession. As a result, global risk sentiment turned negative again, prompting investors to seek shelter in traditional safe-haven assets such as the US dollar.

Earlier this month, the Reserve Bank of Australia gave a dovish signal, hinting that it may pause the rate-hiking cycle next month and the USD’s solid bounce from a seven-week low, driven by a sharp fall in the equity markets. The global risk sentiment has worsened due to disappointing manufacturing PMIs from the Eurozone and the UK, raising concerns about looming recession risks. However, it remains to be seen if the USD bulls can maintain their dominant position, as the Fed sounded cautious about the outlook in the wake of recent turmoil in the banking sector, indicating a less hawkish outlook.

So, if this pair breaks down from its current level early next week, it could find support at the 0.6550 level ahead of the Australian consumer inflation (CPI) report on Wednesday, it could potentially drop to 0.65 or even 0.63. Despite the possibility of a bounce, the overall trend looks quite bearish for the AUD, although we might see the market enter a consolidation phase.


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