AUD/USD, AUD/JPY Forecast: Traders Weigh Risk Weakness vs. USD Softness

• AUD/USD and AUD/JPY remain under pressure as risk sentiment wobbles
• 50DMA support in AUD/USD holds for now but is under repeated testing
• Key event risks ahead include the Fed, BOJ, and China’s data dump
• Momentum signals lean bearish, favouring selling rallies near term

Summary

The Australian dollar is moving loosely as a play on risk appetite, interest rate differentials, and commodity prices midway through March, though nothing appears particularly dominant in driving its overall direction. With little on the domestic economic calendar, price action and offshore risk events will take on greater importance in the days ahead. AUD/USD and AUD/JPY look heavy on the charts, leaving both pairs vulnerable to further turmoil in riskier asset classes.

Traders’ Torn by Countering Forces

The graph below tracks the rolling 20-day correlation coefficients between AUD/USD and various market variables, labelled in the right-hand pane.

Source: TradingView

The scores suggest the Aussie is part rates play, part commodity currency, and part risk barometer, yet none are exerting strong influence over its overall direction. Traders seem to be weighing whether to react to U.S. dollar weakness or softness in riskier assets, all while factoring in tentative signs of recovery in China’s economy and markets. The result is the messy, rangy trade we’ve seen over the past month—a trend unlikely to shift until there’s greater clarity on all three.

Event Risk Concentrated Offshore

With nothing of real significance on the Australian economic calendar until the February jobs report next Thursday, offshore risk events will likely drive direction. Next week’s key economic events are listed below, headlined by the Federal Reserve’s FOMC interest rate decision on Thursday morning in Asia.

Source: TradingView (AEDT)

With little chance of a funds rate change, the focus will be on the updated dot plot, forecasts, and Jerome Powell’s press conference, remembering that markets already have around three rate cuts priced in for the remainder of the year. Ahead of that, U.S. retail sales, China’s monthly data dump, and the Bank of Japan’s interest rate decision could shake things up for the Aussie. The latter, however, is shaping up more as an interim gathering where Governor Ueda may firm up expectations rather than a live meeting for another hike.

Beyond scheduled risk events, AUD/USD and AUD/JPY tend to react negatively to escalating trade tensions between the U.S. and other economies, and vice versa when tensions ease. That’s about as much as you can say given the flippant nature of policy announcements these days.

AUD/USD: 50DMA Doing the Heavy Lifting

Source: TradingView

Thursday’s bearish engulfing candle for AUD/USD flags near-term downside risks, putting a break beneath the 50-day moving average on watch. The pair has bounced off the level four times over the past four sessions, making it a key near-term support.

A break below the 50DMA would bring uptrend support from the multi-year low set in February into play—currently around .6250. If that gives way, .6238, .6188, and .6088 will be potential downside targets for shorts.

If the 50DMA continues to hold, a push back into the low-63 cent region could be on the cards, though it’s worth noting how poorly AUD/USD traded above .6320 earlier in the week. .6364 and long-term uptrend resistance around .6405 are other topside levels to watch.

Momentum indicators such as RSI (14) and MACD are offering marginally bearish signals, favouring selling rallies over buying dips near term.

AUD/JPY Home on the Range

Source: TradingView

AUD/JPY also printed a bearish engulfing candle on the daily timeframe Thursday, pointing to a growing risk of a downside range retest of 91.86. However, despite the bearish price signal, RSI (14) is showing bullish divergence, setting higher lows since early March. MACD is also close to confirming a bullish signal but isn’t quite there yet.

For now, range trading between 91.86 and 94.65 remains the base case until a decisive breakout occurs.

-- Written by David Scutt

Follow David on Twitter @scutty