The AUDUSD currency pair currently grapples with a pronounced downtrend, having hit a staggering low of 0.6308 this past Wednesday, marking its lowest point in over a year. This decline comes after slipping below a significant long-term support trendline established since October 2022. As traders and analysts focus their attention on the Federal Open Market Committee (FOMC) meeting scheduled for 19:00 GMT, questions abound regarding the possible implications of this backdrop for the Australian dollar and its future trajectory.
The recent downturn in the AUDUSD has elicited speculative thoughts regarding a potential ‘buy the dip’ opportunity. Currently, the currency pair is oscillating around crucial support levels near 0.6269-0.6300. However, even though momentum indicators like the Relative Strength Index (RSI) and the stochastic oscillator hint at an oversold condition, they have yet to signal an actual reversal. This indicates that, despite market fatigue from selling pressure, there remains a robust bearish sentiment dominating the market, leaving the bears in control for the time being.
Should the downtrend persist and the pair break below the 0.6200 level, this may trigger further declines targeting the critical psychological level at 0.6100, and potentially extending down to 0.5980, a level that harkens back to April 2020. The current weakness reflects broader market uncertainties, particularly in relation to monetary policy shifts from the Federal Reserve.
On the flip side, for bullish traders to regain some momentum, a break above the current descending channel and the 20-day Simple Moving Average (SMA) around 0.6440 would be paramount. However, before reaching that point, the pair must first contend with the strong resistance at 0.6388. Success in overcoming these barriers may pave the way toward higher targets, specifically the 0.6500-0.6530 range, which coincides with the 50-day SMA.
It is equally important to note that both the 50-day and 200-day SMAs recently exhibited a bearish crossover known as a “death cross.” This phenomenon serves as a cautionary backdrop, underscoring the potential for continued downward pressure and placing immediate doubts on any possibility of a reversal.
As the economic landscape evolves with forthcoming FOMC announcements, the outlook for AUDUSD appears challenging. While there may be opportunities for recovery amid market volatility, the prevailing sentiment suggests that strong selling interest will likely persist below critical levels like 0.6565. Consequently, market participants should approach with caution and remain attuned to ongoing developments that could either perpetuate the downtrend or spark a surprising bullish rebound. In essence, the challenges facing AUDUSD necessitate a vigilant strategy, with traders balancing potential risks and rewards in an uncertain environment.