AUD/USD Forecast: Flight to Safe-haven USD, Dumping Aussie

• Britain’s fiscal policy is causing a lot of market turbulence and risk aversion.
• There are growing concerns about the global economy amid rising interest rates.
• The declining commodity prices are weighing on the Australian dollar.

Today’s AUD/USD forecast is bearish. The Australian dollar plunged to new multi-year lows on Monday as investors flocked to the safe-haven dollar amid market turbulence caused by Britain’s historic tax reform proposal and fears about global economic growth and rate increases.

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Traders became extremely risk-averse and fled to the safe-haven dollar due to speculation that Britain’s economic plan would stretch its budget.

The Australian dollar plunged on Monday to $0.6487, its lowest level since May 2020, before recovering to $0.6528, back above the 65-cent mark. This comes after a 1.7% decline on Friday.

The Australian dollar is under pressure due to concerns about the global economy, notably China, and declining commodity prices.

“We have significantly lowered our 2022 end year ‘target’ for the AUD to USD0.65 (from USD0.69),” said Bill Evans, chief economist at Westpac, in a note on Monday.

“That means that over the remainder of 2022, there will be periods when the AUD will trade below the USD0.65 level given the high volatility in currency markets to date.”

Nonetheless, Evans believes that the Australian dollar will strengthen in 2023, with most of the recovery in the year’s second half.

AUD/USD key events today

Investors will pay close attention to speeches from FOMC members, including Eric Rosengren, Raphael Bostic, and Mesters. These speeches are closely examined for signals about the potential future course of monetary policy.

AUD/USD technical forecast: More sellers waiting below 0.6500

The 4-hour chart shows the price trading far below the 30-SMA and the RSI in the oversold region. After a strong bearish move, the price has paused at the 0.6500 psychological level. Bears have shown their strength in the steep move that saw the price breaking below the 0.6600 support level.

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Given that the RSI is trading in the oversold region, buyers might return for a retracement move to retest 0.6600 before the price breaks below 0.6500. However, if bears are still strong, the price might just consolidate in a tight range before breaking below 0.6500 and plunging further down.

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