- The Australian Dollar has rallied in recent weeks after suffering a drastic decline in early March
- While sentiment has been steadily improving, AUD/USD may remain pressured
- Resistance overhead may also look to keep price contained beneath the 0.62 area
Australian Dollar Price Outlook: Headwinds Remain for AUD/USD
The Australian Dollar steadily recovered in the tail end of March, clawing back lost ground. Encouragingly, recently released economic data from China has revealed an astonishing recovery in productivity which may look to boost the Australian Dollar in the weeks ahead. Still, many analysts harbor concerns about the validity of the recent figures, arguing such a rapid recovery seems implausible. Either way, the information may have assisted the broader rebound in risk appetite.
AUD/USD Price Chart: Hourly Time Frame (March 2020 – April 2020)
In turn, other risk assets like the S&P 500 and Dow Jones have marched higher in tandem – but are beginning to show signs of weakness. With the number of coronavirus cases rising in the United States and Europe, it seems as though much of the world is just beginning to undergo the worst of the outbreak and economic growth – an important driver of the Australian economy – may grind to a halt in these areas. In conjunction with price stalling out around 0.62, AUD/USD appears vulnerable.
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That being said, the pair will look to the trendline around 0.60 for initial support if selling continues. Against the larger backdrop, maintaining price above the swing lows established from mid to late March at 0.5872, 0.57 and 0.5509 respectively may prove crucial in keeping the current rally afloat. A bearish break beneath the March 19 low would likely open the door for further losses.
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IG Client Sentiment Data reveals retail traders are relatively split on AUD/USD, but traders are narrowly more bullish – creating a slightly bearish bias. Collectively, the fundamental uncertainty, waning risk appetite, technical barriers and client positioning seem to suggest AUD/USD may bleed lower in the days ahead.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX