This Friday could be quite interesting, considering that the Australian Dollar Outlook May Deepen Bearish, AUD/USD Clears Support at $1.00. As I write this, it is early in the morning in Sydney and we are just about to open for the weekend.
The US Dollar has been strengthening lately, on the back of aggressive rate hikes. However, there is a change of heart by the Federal Reserve in regards to its recent QE program.
As a result, the Australian Dollar is poised to make a strong recovery, while the U.S. Dollar is now lower than at any time since last August. Some commentators are calling for the AUD/USD to make a new high and this may be well within the realm of possibility.
If the US Dollar continues to weaken, there will be a greater appreciation for the Australian Dollar and this is a sign that the AUD/USD is overbought. In other words, there will be an increase in demand for Australian dollars to make up for the reduced supply.
However, as I write this, the US Dollar is only slightly lower than its present level. If the Federal Reserve announces some additional interest rate increases, the AUD/USD could break above the 1.02 resistance level, which it currently shares with the Japanese Yen.
On the other hand, if the Dollar declines, the AUD/USD is positioned to act as a support. Currently, the Australian Dollar Index is trading above the 100-point level which indicates a buying opportunity.
For a currency pair, the US Dollar is clearly the anchor of the Australian Dollar Index. Therefore, with the USD is making a new high and going lower, the AUD/USD is positioned to act as a support as the Australian Dollar index tries to resume the upwards path.
So, if you are bullish on the AUD/USD, the bull market theory says that you should buy now and avoid the speculative selling tactics that some investors have adopted recently. With the AUD/USD still trading below the 1.00 level, that is precisely what I am doing.
The other side of the coin is that if the USD slips, the AUD/USD is set to recover. So, just to be on the safe side, I am maintaining my buy of AUD/USD, which is presently trading at approximately $0.98.
In summary, the Australian Dollar Outlook May Deepen Bearish, AUD/USD is positioned to regain a support level, which it currently shares with the US Dollar. If the US Dollar fails to strengthen and recovers, I will be looking to add to my long position in AUD/USD.
Again, please note that I am not a professional currency trader and I am not a technical analyst. Please do not consider this article as financial or investment advice.
To that end, if you feel that I have provided an accurate portrayal of how the AUD/USD is currently trading, I would appreciate it if you would take the time to visit my website and pass it along to someone that could benefit from it. Cheers!