AUSTRALIAN DOLLAR FORECAST: AUD/USD & AUD/JPY REVERSAL EYED BY BEARS AMID UNDERRATED CORONAVIRUS RECESSION RISKThe Australian
AUSTRALIAN DOLLAR FORECAST: AUD/USD & AUD/JPY REVERSAL EYED BY BEARS AMID UNDERRATED CORONAVIRUS RECESSION RISK
The Australian Greenback recorded a formidable rally all through April. Australian Greenback energy over the previous couple of weeks was exerted towards anti-risk currencies, just like the US Greenback and Japanese Yen, particularly.
This mirrored a broad enchancment in market sentiment, which got here on the again of unparalleled liquidity and financial stimulus measures from main central banks and governments, in addition to an inflow of virus optimism. Current Australian Greenback upside has additionally corresponded with the retracement in foreign money volatility.
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Though, contemplating a coronavirus recession is doubtless unavoidable, and materially threatens the pro-risk Australian Greenback, can the latest advance by AUD/USD and AUD/JPY prolong increased? Or is the Australian Greenback gearing up for a bigger reversal?
AUSTRALIAN DOLLAR PRICE OUTLOOK IMPROVED AS VOLATILITY FADED, CORONAVIRUS RECESSION STILL THREATENS TO REKINDLE RISK AVERSION
Chart created by @RichDvorakFX with TradingView
Carefully correlated to the S&P 500 VIX Index, and dealer sentiment normally, the Australian Greenback stays susceptible to a broader reversal, and will comply with the return of volatility. This bearish situation for AUD value motion seems more and more doubtless as complacency builds and market individuals refuse to acknowledge progressively woeful financial knowledge.
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If FX volatility ebbs additional, nonetheless, the Australian Greenback may proceed its latest ascent. Although this appears unlikely for now in mild of the most recent China tariff risk from Trump. Furthermore, the technical backdrop for AUD/USD and AUD/JPY paint bleak photos for Australian Greenback outlook.
AUD/USD PRICE CHART: WEEKLY TIME FRAME (OCTOBER 2017 TO APRIL 2020)
The Australian Greenback faces a pivotal inflection level as AUD/USD value motion rallies into an enormous space of resistance. This technical barrier, which threatens to ship AUD/USD recoiling again decrease, is highlighted by a confluence of its 20-week shifting common and 38.2% Fibonacci Retracement stage of the January 2018 to March 2020 buying and selling vary.
| Change in | Longs | Shorts | OI |
| Daily | -25% | 8% | -7% |
| Weekly | -12% | 5% | -2% |
AUD/USD PRICE CHART: DAILY TIME FRAME (DECEMBER 2019 TO APRIL 2020)
Zooming in on a each day AUD/USD chart reveals the Australian Greenback is already beginning to edge decrease with a bearish response to its higher Bollinger Band close to the 0.6500 value stage. Technical assist, underpinned by the 61.8% Fibonacci retracement of its year-to-date buying and selling vary, could present AUD/USD a level of buoyancy. Though, Australian Greenback promoting strain might speed up if spot AUD/USD value motion invalidates its short-term bullish pattern famous by the latest sequence of upper lows.
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AUD/JPY PRICE CHART: DAILY TIME FRAME (DECEMBER 2019 TO APRIL 2020)
A each day AUD/JPY chart additionally reveals how the Australian Greenback might come below strain after rejecting the 70.000 deal with – a large zone of confluent resistance famous by the 100-day exponential shifting common, March 08 hole decrease, 61.8% Fib, in addition to the highest barrier of its rising wedge sample. But, AUD/JPY may preserve marching increased, maybe towards the 74.000 value mark, if dealer danger urge for food stays upbeat and volatility compression bolsters the foreign money carry commerce.
| Change in | Longs | Shorts | OI |
| Daily | -24% | 7% | -9% |
| Weekly | -10% | -11% | -11% |
Nonetheless, the trail of least resistance appears decrease and danger seems tilted to the draw back. A breakdown under the positively-sloped assist trendline, prolonged by means of the latest string of upper highs and better lows, might exacerbate Australian Greenback weak point towards the Yen. If this materializes, it could immediate Aussie bears to make a push for a retest of the March 18 swing low, which is a situation that will warrant further credence amid a violent return of danger aversion.
— Written by Wealthy Dvorak, Junior Analyst for DailyFX.com
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