AUDUSD Forecast – Underpinned by Improving Risk Sentiment, Weaker US Dollar

The Australian Dollar is edging higher on Friday as its U.S. counterpart struggled for direction on fears of an economic slowdown. The Aussie is being underpinned by improving risk sentiment.

At 05:30 GMT, the AUDUSD is trading .6915, up 0.0005 or +0.07%. On Thursday, the Invesco CurrencyShares Australian Dollar Trust ETF (FXA) settled at $68.39, down $0.28 or -0.41%.

Aussie Supported by Weaker US Dollar

In the U.S. on Thursday data showed the world’s biggest economy was slowing down after multiple hefty interest rate hikes from the Federal Reserve as traders hope for a pause in tightening this year.

However, the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to another month of solid job growth and continued labor market tightness.

The price action indicates the U.S. Dollar is data-dependent and remains vulnerable as traders keep scaling back Fed rate expectations.

However, this will shift next week when investor focus shifts to the upcoming Fed meeting on Jan. 31 – Feb. 1. Currently, the market is pricing in a 25-basis point rate hike after the Fed raised rates by 50 basis points in December after four straight 75 basis point hikes.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through .6688 will change the main trend to down. A move through .7064 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through the minor bottom at .6860 will reaffirm the downtrend.

The nearest resistance is a minor pivot at .6968. The closest support is a pair of 50% levels at .6876 and .6846.

Daily Swing Chart Technical Forecast

Trader reaction to .6910 is likely to determine the direction of the AUDUSD on Friday.

Bullish Scenario

A sustained move over .6910 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the minor pivot at .6968. Overtaking this level could trigger an acceleration to the upside with .7064 the next target.

Bearish Scenario

A sustained move under .6910 will signal the presence of sellers. The first downside target is a support cluster at .6876 – .6872. This is followed by a minor bottom at .6860 and a 50% level at .6846. The latter is a potential trigger point for an acceleration into a long-term 50% level at .6760.