AUD/USD Forecast: Bounces from Major Support

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The AUD/USD initially fell during trading on Wednesday to reach down to the 0.67 level.

The AUD/USD initially fell during trading on Wednesday to reach down to the 0.67 level. The 0.67 level has been important previously, so the fact that we bounce from here should not be a huge surprise.
The candle ended up forming a hammer, which of course is a bullish candlestick in and of itself. You should also keep in mind that the US dollar was a little overbought in general, so this bounce is not a huge surprise.
It is more likely than not only a matter of time before we would see the US dollar pick up a certain amount of strength.

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The market has been a bit too oversold for a while, and the fact that we are bouncing is actually a good thing. Keep in mind that the 0.67 level underneath is massive support, and if we were to break down below there, then it’s likely that we could see a massive selloff. At that point, I would anticipate that the Australian dollar will go looking to the 0.65 level, and then further down from there. The market is more likely than not going to continue to recognize the 0.67 level as important, so it’s worth paying close attention to.

Negativity Ahead

If we do rally from here, the 50-Day EMA sits above near the 0.69 level and is dropping. At this point, the market is likely to continue seeing a lot of negativities, and I think it would make quite a bit of sense that we would continue to see resistance there based upon the fact that it has been very noisy around the 50-Day EMA multiple times.

Keep in mind that the Australian dollar is highly levered to the Chinese economy, and therefore you will have to pay attention to China itself. Beyond that, there is a lot of concern around the world for global demand, and if there is a lack of demand, a lack of demand for commodities will certainly follow. Regardless, in the short term, there is a lot of spring in this bounce, but I think it is going to be short-lived at best. Regardless, I like the idea of feeding signs of exhaustion after a short-term bounce and taking advantage of what is best described as “cheap US dollars.”