AUD/USD showed first reversal signs on panic selloff on coronavirus hysteria

Google+ Pinterest LinkedIn Tumblr +
Image by QuinceCreative from Pixabay

Australian Dollar during the total selloff last Friday (February 28) has touched an important support level at 0.6432 against US Dollar. The pair price didn’t break out this key resistance. The volume during the testing of this level was very high and the subsequent growth looks like the entrances of large buyers to long positions. The current AUD/USD pattern is very similar to the culmination of sales, which in turn gives hope for the beginning of a full-fledged pullback, which may well turn into a global reversal.

AUD/USD DAILY CHART

AUD/USD - Daily Chart - March 2020

Moreover, the US Dollar positions against the background of rumors about FED interest rate reduction on 50 basis is extremely weak (Goldman Sees 50 bps Fed Cut in March). So our priority is long positions and we wait AUD/USD will continue its growth and break the local resistance level at 0.6550, followed by an exit up to 0.66 and higher. There is a probability that the Aussie will not reach the lower border of the channel at all (0.61 – 0.63), since too high volume was poured last Friday, which would allow the bears to continue the rally after a small pullback.

AUD/USD MONTHLY CHART

AUD/USD, Aussie, Australian Dollar - Monthly Chart - March 2020

The currency pair of the Australian dollar vs US dollar is often referred to as a commodity coupling. In the case of the Australian dollar against US dollar, gold is served as a catalyst for the pair’s exchange rate valuation. Both the US and Australia play a significant role in global gold production, holding the second and third place respectively. Over the past couple of months, we have seen a strong negative correlation between the Australian dollar and gold against the background of pandemic and panic about the coronavirus. Look at the GOLD monthly chart below:

GOLD MONTHLY CHART

XAU/USD, Gold, Commodity - Daily Chart - March 2020

Factors that influenced the fall of the Australian Dollar for the past months
  • The coronavirus continues to disrupt the global economy, especially in China and other Pacific countries, including Australia.
  • The Australian economy, as well as the AUD rate, strongly depend on its Asian neighbor – China, as most of Australian exports are shipped to China. The USA – China trade war exacted a heavy toll on the Australian economy. In October 2019, the AUD/USD pair fell to a decade-long low of 0.6670. The trade tensions relief boost the market’s sentiment. The more progress in the US-China relationship, the higher the chances the commodity-driven Australia will get economically stronger.
  • Australia fires – bushfire crisis. The Moody’s economist Katrina Ell said the fires would further cripple Australia’s already weak consumer confidence, increasing the chances of a rate cut next month, as well as causing damage to the economy through increased air pollution and direct harm to industries such as farming and tourism.
  • The market brings forward Reserve Bank of Australia rate cut expectations

Despite all the fears and panic in the market around the coronavirus, we have re-entered in BUY on AUD/USD @ 0.6485 after a strong rebound of the pair from the level of 0.6432 on Friday (February 28). The Aussie remains heavily oversold against the US Dollar.

According to the recent FXStreet survey, the Aussie has a modest bullish bias. Analyzing the AUD to USD forecast poll 2020, experts suggest the average AUD/USD exchange rate in 2020 will be 0.6969 in the first half of 2020 and will reach 0.7000 by the end of 2020.

Start trading now! We recommend out true ECN and DMA Australian broker with almost zero spreads and 1:500 leverage. Reviewed and awarded by Intomillion team. Fast execution, perfect for scalping. Find out more on FP Markets Review

Share.

About Author

Hi, Friend! My name is Gran Layson. I am an experienced currency and stock trader from Europe. If you want something to be done well, do it yourself, therefore often I feel myself as “Swiss Army Knife Man”. I am the Intomillion’s website administrator, developer ... read more

Comments are closed.

Forex Brokers
  • We believe in what we do

    Since the foundation of the project, we have been trying to turn one Dollar into a Million. Many dollars were lost on the way to the cherished goal. Nobody said it was going to be easy. However, we believe that everything is possible. Each time we lose a Dollar, we start again stronger with more experience and dedication. Today the project is much more than just about a Dollar. Our philosophy is openness and transparency. So apart from trading on Forex, we are creating a variety of useful Tools, sharing our developments, ideas, and experiences with our followers. We are true fans of financial markets and looking forward making trading more understandable and showing that profitable trading is possible.

All information on this page is subject to change. Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. Intomillion.com owners and affiliates will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results.