The AUDUSD currency pair has recently entered alarming territory, hitting a 14-month low at 0.6308. This decline follows a notable breach of a long-term support trendline established back in October 2022. The persistent downtrend leaves traders and analysts pondering whether this trend will continue in light of upcoming market events, particularly the Federal Open Market Committee (FOMC) meeting scheduled for 19:00 GMT. Market participants are watching closely, as this critical meeting could set the tone for forthcoming currency fluctuations.
As the AUDUSD hovers near its 2023 low, there is growing speculation about the potential for a short-term rebound or ‘buying the dip’ opportunities. Current technical indicators like the Relative Strength Index (RSI) and stochastic oscillator suggest that the recent sell-off may have pushed the market into oversold territory. However, neither indicator has fully bottomed out, implying that bears currently dominate the trading landscape.
The significance of these indicators can’t be overstated; while they hint at a potential pause in the downtrend, they also suggest that further declines are plausible if the critical level around 0.6200 is penetrated. Such a breach would open the door for the pair to test even lower boundaries, specifically the psychological level of 0.6100, and further to the 0.5980 zone, reminiscent of levels last recorded in April 2020.
On the flip side, for the bulls to assert themselves, a break above the falling channel and the 20-day simple moving average (SMA) is imperative. This key resistance resides near 0.6440, which poses a formidable barrier to any upward momentum. Should the bulls manage to overcome this resistance, the next challenging milestones would include the levels of 0.6388 and the 50-day SMA, positioned at approximately 0.6500-0.6530.
It’s also worth noting that the recent formation of a ‘death cross’ between the 50-day and 200-day SMAs casts a long shadow over any potential for immediate trend reversals. A ‘death cross’ is traditionally a bearish signal and suggests that traders should exercise caution when considering long positions.
The AUDUSD is currently caught in a bearish momentum with limited room for immediate recovery. Although speculating on a rebound might be appealing, especially near the 2023 lows, the overarching trend remains downward. Selling pressure is likely to persist, particularly below the resistance level of 0.6565. Market watchers will need to stay alert to the outcomes of the upcoming FOMC policy announcement, as this could significantly impact currency valuations and alter the technical landscape for the AUDUSD pair moving forward. Traders should remain vigilant, balancing risk with an understanding of the broader economic indicators at play.
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