AUD/USD Price Outlook:
- AUD/USD[1] trades narrowly beneath 0.67 after surging higher since its mid-March lows
- Nevertheless, the Australian Dollar[2] remains highly sensitive to risk sentiment
- As a consequence, AUD/USD[3] may loosely track the performance of leading risk assets like the Nasdaq[4] and S&P 500[5]
Australian Dollar Forecast: AUD/USD Price Stalls Near 2020 Peak
The Australian Dollar has charged higher in recent weeks and has returned to the levels it began 2020 with as a result. While remarkable, the recovery has not been without its speedbumps both fundamentally and technically. A burgeoning Australia-China trade conflict and continued economic uncertainty due to coronavirus are two of the main factors that have worked to erode the Australian Dollar’s recovery, but US Dollar[6] weakness has seemingly prevailed as volatility recedes and the Fed expands its balance sheet.
AUD/USD Price Chart: 4 – Hour Time Frame (January 2020 – June 2020) S&P 500 Overlaid in Blue
Chart created with TradingView
Now that AUD/USD has returned to the levels it was trading at prior to the covid outbreak, market participants must decide if the current landscape constitutes a continuation higher, or if the recovery has become overbought and a retracement is in store. Either way, it would appear the shorter-term performance of the Australian Dollar is closely tied to broader risk sentiment as it has declined alongside recent pullbacks in the Nasdaq 100 and S&P 500.
AUD/USD Price Chart: 4 – Hour Time Frame (January 2020 – June 2020)
Therefore, resurgent selling pressure in the US indices may lead to broader risk aversion that might leave AUD/USD vulnerable. While traders and investors grasp for the longer-term trend, the Australian Dollar may be caught between resistance overhead, derived from the
