Short-Term Forex Technical Outlook: AUD/USD

The rise in market sentiment led the Australian dollar to strengthen against its currency counterparts over the past five-weeks however, high uncertainty surrounding the Reserve Bank of Australia’s interest rate decision paired with a weakening outlook for growth and inflation is likely to weigh on the high-yielding currency over the week.

[B]Currency Pair:[/B] AUD/USD
[B]Chart: [/B]60 Min Charts
[B]Short-Term Bias: [/B]Flat

[B][U]Analysis

[/U][/B]

The rise in market sentiment led the Australian dollar to strengthen against its currency counterparts over the past five-weeks however, high uncertainty surrounding the Reserve Bank of Australia’s interest rate decision paired with a weakening outlook for growth and inflation is likely to weigh on the high-yielding currency over the week. After reaching a high of 0.8524 in September, the AUD/USD slipped to a low of 0.6007 in October, and the lack of momentum to break above 0.7260-70 (50.0% Fib) could lead the pair to fall towards the lower-end of its range over the week if the RBA surprises the markets by lowering the benchmark interest rate by 25bp to 3.00. As a result, we are likely to see the aussie-dollar trend lower over the next 24 hours of trading as investors expect the economic downturn in the region to intensify, and as the central bank forecasts the $1T economy to face a recession for the first time in over a decade, deteriorating fundamentals could drive the pair lower over the near-term. Over the next few hours of trading, we may see the AUD/USD attempt to break below the 0.7100 level to close the gap from the 120 SMA, and a break below this level should lead the pair to the retrace the rally from the previous week. Be sure to check out other Technical Reports from DailyFX for additional information on the major currency pairs.

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