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What’s going on with Australian dollar vs. US dollar (AUD/USD)?

What’s going on with Australian dollar vs. US dollar (AUD/USD)?

The Australian dollar (AUD) has been under significant pressure since the start of 2024 and recently experienced two of its most dramatic weeks of the year. 

The 7-day period ending on March 19, for example, constituted an all-time high for bearish bets against the currency.

Additionally, after briefly spiking to $0.663 between Wednesday, March 20, and Thursday, the currency rapidly collapsed down to approximately $0.65 by Friday and has remained near the price up until press time on March 25.

AUD/USD 7-day chart. Source: TradingView

One of the likely drivers for the bearish bets against the currency has been the lackluster performance of Australia’s benchmark ASX 200 index which has, since January 1, done little other than hold its ground as it is 2.41% in the green year-to-date.

In the same time frame, the U.S. benchmark index of the country’s major stocks  – the S&P 500 – rose 10.36%.

AUD/USD technical analysis

The technical analysis (TA) for the Australian-American dollar (AUD/USD) trading pair shows that the bearish bets might have been well-placed. 

TA based on the last 24 hours of trading leads to oscillators being neutral when it comes to AUD but moving averages (MA) flashing a “strong sell” leading to an overall “sell” rating. When based on last week’s performance, technical analysis provides the same reading.

AUD/USD technicals based on 1 day and 1 week. Source: TradingView

The Australian dollar’s longer-term performance is only slightly stronger as, while the overall rating and the moving averages remain unchanged, oscillators turn to rate the currency as “buy.”

AUD/USD technicals based on 30 days. Source: TradingView

AUD likely to come under increased pressure

Judging by the latest comments coming out of the FED, Aussie is likely to continue facing pressure as Jerome Powell indicated a more dovish upcoming Federal Reserve. 

While it is yet to be specified when interest rate cuts will start happening, the change of Chair Powell’s tune could on its own lead to further strength for the U.S. equity markets and for the country’s currency – and indeed, Friday saw major American indices, including the S&P 500 hit new all-time highs. 

On the other hand, Raphael Bostic of the Atlanta FED recently indicated that there is likely to be only one cut in 2024 – lower than most Q1 predictions and significantly below what investors hoped for throughout 2023 – hinting toward the possibility that AUD will face less pressure than anticipated.

Finally, despite the volatility, it is noteworthy that the Aussie has so far managed to reliably stay between its support near $0.645 and resistance near $0.6650.

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