Australian Dollar Forecast: AUD/USD Battle Lines Drawn Ahead of Fed

Australian Technical Forecast: AUD/USD Weekly Trade Levels

• Australian Dollar reverses off technical resistance at yearly downtrend
• AUD/USD bulls look to defend support into May open- Fed rate decision, NFPs on tap
• Resistance ~6556/59 (key), 6673/76, 6810/18- Support 6433/48 (key), 6335, 6283

The Australian Dollar is on the defensive this week with AUD/USD turning from technical resistance ahead of major event risk. The focus is on this pullback from the yearly downtrend with the Fed interest rate decision and US Non-Farm Payrolls on tap into the May open. Battle lines drawn on the AUD/USD weekly technical chart.

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Australian Dollar Price Chart – AUD/USD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; AUD/USD on TradingView

Technical Outlook: In last month’s Australian Dollar Technical Forecast we noted that AUD/USD was trading near the yearly lows and to be on the lookout, “for possible inflection into key support in the days ahead – rallies should be limited to the yearly moving average IF price is heading lower on this stretch with a close below 6500 needed to fuel the next major move in price.” Aussie made numerous attempts to breach the 52-week moving average but failed to mark a weekly close above with price plunging more than 4.25% off the April highs to register a low at 6362 before rebounding.

A rally of more than 3.5% takes AUD/USD back into resistance this week at the yearly moving average and the focus is on a reaction off this mark. Initial support rests with the low-week close (LWC) / 61.8% Fibonacci retracement of the recent advance at 6433/48. A break / weekly close below this threshold would threaten resumption of the yearly downtrend with subsequent support objectives eyed at the 2023 LWC at 6334 and the 88.6% retracement of the late-2022 rally at 6283- both areas of interest for possible downside exhaustion / price inflection IF reached.

Key resistance is eyed at the 38.2% retracement of the December decline / 52-week moving average at 6556/59 with a breach / close above downtrend resistance (red) ultimately needed to suggest a larger breakout / reversal is underway. The next major lateral level of technical significance is eyed at 6673/76- a region defined by the 2019 low, the 2008 LWC, the March high, and the 61.8% retracement of the yearly range. Look for a larger reaction there IF reached.

Bottom line: The rebound off fresh yearly lows is now testing confluent resistance at the 2024 downtrend. From a trading standpoint, losses should be limited to 6433 IF price is heading higher here with a close above the December slope needed to fuel the next leg in price.

Keep in mind we are heading into the May open and ultimately, we’ll be looking to the monthly opening-range for guidance with the Fed interest rate decision and US Non-Farm Payrolls (NFP) on tap. Note that a break lower here could fuel another bout of accelerated losses- stay nimble into the releases and watch the weekly close for guidance. I’ll publish an updated Australian Dollar Short-term Outlook once we get further clarity on the near-term AUD/USD technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

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