Aussie Price Forecast: Can AUD/USD Break the Bull Pennant? It appears the Australian Dollar’s recent success in strengthening from its weakest since 2020 will continue into this month. So as we move into January and the year-end trading session, you can expect a break in the USD against the AUD at the beginning of next month.
This is an outcome that could herald another rally on Aussie price forecast: Can it Still Break the Bull Pennant? Why is this happening and what is causing it?
First, consider how much of the market is driven by a major news event or economic report. Economic data or news about a particular company usually drives up the Aussie dollar before the event or report is made public. This is also true if the company or report is about to be released.
When the event occurs, the Aussie dollar typically starts weakening and then strong rallies occur after it. The difference between these two events is that the stronger an event is, the stronger the rally. This is also true for a company that reporting disappointing earnings.
The key point is that it doesn’t take too much time for a news event to cause the Aussie to strengthen or weaken. And it doesn’t take too much time for a rally to occur as well. In short, the stronger a news event or company, the stronger the rally.
For this reason, I wouldn’t worry too much about any economic report, or news event, impacting the Aussie price. If it were to start weakening or strengthening, this would likely happen within a couple of days, giving the market ample time to sort itself out.
However, I do think that the current event is going to have more of an impact than most of the previous news events. Consider a case where a company reports a weak quarter and the dollar starts to fall.
This could serve as a signal to start buying at lower levels and the dollar rises shortly after. Then the rally begins as the market breaks out and tries to correct for a short period. This type of event, which I call a correction, is almost always followed by another rally as long as it’s market sentiment that has changed.
This is also a situation where a minor news event could have a far bigger impact. So it’s wise to be watching these minor events and making some moves to protect your positions once they occur.
For example, an economic report from China (China reporting a fall in GDP) can have a far bigger impact on the Aussie price than a company failing to report earnings. I would be following this story closely, not only to make sure it breaks right but also to make sure that the market can pull back from a major selloff.
We’ve seen this many times in the past with how currency strength has acted as a catalyst for a rally. One thing I’ve learned about the currency markets is that the stronger the current, the more powerful the rally.
So, if the Aussie price continues to weaken on an almost daily basis, I think it’s smart to start preparing for the following rally. Why Aussie Price Forecast: Can it Still Break the Bull Pennant?