AUD/USD Forecast – Aussie Dollar Gives up Early Gain

AUD/USD Forecast Video for 05-01-2024

Australian Dollar vs US Dollar Technical Analysis

The Aussie dollar initially tried to rally during the trading session here on Thursday but gave back gains as the US dollar continues to be a favored currency. Whether or not the US dollar strengthens for any big move remains to be seen because quite frankly we have the jobs number on Friday and that will be a major situation as to where the bond market moves. If the bond market starts to react positively, meaning that yields drop, that will work against the US dollar, and we will see the Australian dollar benefit as a result.

On the other hand, if we see the yields spike in America, that should send the Aussie lower just due to interest rate differential. All things being equal, this is a market that has pulled back from an extremely overbought condition, and it doesn’t surprise me that we are sitting right around this area trying to sort out where we are going next. After all, we are essentially in the middle of what I think will be a range, and therefore we are essentially near fair value.

The 0.65 level underneath is massive support while the 0.69 level above is massive resistance. I don’t feel that there’s enough risk to reward to trade in either direction at this point, and therefore I’m waiting to see what the reaction to the non-farm payroll announcement will be before putting on a new position. Liquidity comes back to the market in full next week, would be my guess, as traders will be back from the holiday season and will have had a couple of data points to focus on.

That being said I think there is still a strong proclivity for people to think that the Federal Reserve is going to cut aggressively, but if they do so, the question is whether or not they do so out of necessity? Because if they do, then the US dollar becomes a safe haven asset and people may run toward it. It’s a bit counterintuitive, I know, but at the end of the day this is the type of mental gymnastics that you will have to do in 2024.

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