- Recession worries have pushed investors to seek safety in the US dollar.
- AUD/USD has more downside potential.
- The pair is facing resistance in the charts.
Thursday’s AUD/USD forecast is bearish as recession worries push more investors to the safe-haven dollar.
“Ultimately, people who say the dollar is going to weaken because the market is not pricing in as many interest rate hikes from the Fed as before are forgetting that the dollar is also a haven,” said Jane Foley, head of FX strategy at Rabobank.
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“If we are, coincidentally, looking at a potential recession in the eurozone and the UK, and if global growth is coming down…what are you going to buy if you sell the dollar?”
The dollar will likely remain strong against most currencies in these uncertain times; therefore, AUD/USD’s downside is still significant.
The June meeting minutes showed a lot of concern that the continued rise in inflation would reduce faith in the Fed’s ability to tame it. For this reason, the bank keeps tightening its policy despite the risk of recession.
AUD/USD key events today
There won’t be any significant news releases from Australia today, so all focus will be on the United States. Investors will pay attention to the number of people who filed for unemployment insurance for the first time in the past week. Initial jobless claims point to the state of unemployment in the US and how the labor market is faring amid rising interest rates.
Investors will also expect to hear speeches from Fed and FOMC members later today.
AUD/USD technical forecast: Resistance at the 30-SMA
From the 4-hour chart above, we can see the price at 30-SMA. This SMA acted as resistance on July 4th and June 30th and might also stop bulls this time. AUD/USD is in a bearish trend as it is trading below the 30-SMA, and its RSI is slightly below 50.
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The 0.67615 is a solid support level, and the price has tried three times to break below it but has failed. If the SMA acts as resistance, we might see the price move to 0.67615 for another attempt at breaking below. However, if the SMA fails to hold as resistance, we could see the price retesting 0.68843, which acted as resistance on the 4th of July.
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