AUD/USD Forecast: Australian Dollar Slowing Its Advance

The Australian dollar has pulled back a bit during the course of the trading session on Thursday as the 0.73 level above continues offer resistance. That was a previous area of support, so it does make a certain amount of sense that sellers would come back into this general vicinity. The candlestick itself is not necessarily overly bearish, but it does show a bit of hesitation to short the US dollar heading into the Jackson Hole speech by Jerome Powell. We have been in a downtrend for a while, so it does make a certain amount of sense that we would see a bit of hesitation. The 0.73 level is not only resistive, but it is also the beginning of significant resistance that extends all the way to the 0.74 handle.

The Australian dollar has been sold off quite drastically over the last several months, but the earlier part of this week has been a nice bounce. The bounce of course has been extraordinarily strong and therefore I think that it makes a certain amount of sense that we would run out of momentum. This is especially true as the market will continue to wait for words coming out of Jerome Powell after the Jackson Hole meeting that so many people are paying close attention to. If he does in fact sound more hawkish, that will probably send this market much lower. On the other hand, if the market were to get dovish statements coming out of the Federal Reserve, then it could send this market higher, but we need to get past the 0.74 level to be convincing.

If we do get a complete turnaround above the 0.74 handle, then it is likely that the market could continue to go much higher, perhaps even changing the overall trend. The market at this point in time could also continue to be very erratic, as we have seen so many people paying close attention to the attitude of various central bankers, and whether or not we are going to continue to have the monetary policy loose out there, and of course the overall growth situation looking bullish. That being said, the Australian dollar is highly sensitive to the Chinese mainland, and as a result we will have to pay close attention to those economic numbers that continue to disappoint.