AUD/USD Forecast – Australian Dollar Continues to Grind Higher

Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has rallied a little bit during the early hours on Tuesday as traders are going more risk on heading into the FOMC meeting on Wednesday. We are expecting an interest rate cut. The question, of course, is how much, I suspect, and most people believe that it’s going to be 25 basis points, but traders are trying to get ahead of any idea that the Federal Reserve is going to become extraordinarily dovish. If they do, that could launch the Australian dollar towards the 0.6850 level, which has been a major ceiling for almost two years now.

Breaking above there would obviously send this pair much higher and it probably becomes more of a buy and hold situation. However, if they are not as dovish as people think, we will more likely than not turn around and reach towards the 50-day EMA, maybe even the 0.6650 level. Keep in mind that if the Federal Reserve becomes a little too dovish, that might fire off a lot of risk aversion.

And that would have people looking to buy the U.S. dollar and commodity currencies such as the Australian dollar will certainly become sold off rather rapidly. I think there’s a high potential for volatility at this point, and I suspect that we continue to chop around until not the interest rate decision itself, but probably the press conference after the decision, which gives people a little bit of a heads up as to where we might be going.

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