We'll examine the drivers that have shaped the AUD/USD since 2020 and wrap up by discussing the pair's future movements.
In this article, we'll examine the key drivers that have shaped the direction of the AUD/USD pair since 2020. We'll wrap up by discussing factors that could influence the pair's future movements.
1. January 2020–February 2021: Strong Uptrend Following the Pandemic's Volatile Phase
During the early stages of 2020, when the pandemic began to spread, market uncertainty led to a surge in demand for safe-haven assets such as the U.S. dollar. This resulted in considerable fluctuations in the AUD/USD exchange rate.
Following the initial decline, the AUD/USD pair quickly showed a lengthy white real body by the end of March 2020. Note how the next session displayed a pullback which stopped at the midpoint of this large white or green body before resuming the pair's upward trajectory.
![AUD/USD: Strong Uptrend Until February 2021 (Weekly Chart)](https://www.dollarcontext.com/content/images/2023/10/1-AUDUSD-Strong-Rally-From-2020-to-Early-2021.png)
2. March 2021–September 2023: The Peak and the Ensuing Downturn
The AUD/USD gave its first sign of a potential peak with a bearish engulfing pattern in the last week of February 2021. The price range associated with this pattern established a resistance zone, which was successfully tested via a dark cloud cover in May 2021.
Fueled by the decline in commodity prices and the Federal Reserve's hiking cycle, the pair exhibited an extended decline for over two years.
![AUD/USD: The Top in Early 2021 and the Subsequent Decline (Weekly Chart)](https://www.dollarcontext.com/content/images/2023/10/2-AUDUSD-Sustained-Decline-Since-Early-2021.png)
3. Outlook for Late 2023 and Throughout 2024
While the short-term direction of the AUD/USD pair remains uncertain, several critical elements could shape its future path:
- Impact of Artificial Intelligence on Market Sentiment: Advances in AI technology have the potential to shift market sentiment, possibly making safer assets like the U.S. dollar less appealing.
- Concerns Over Economic Downturn: The aggressive rate hikes by the Federal Reserve, along with red flags such as an inverted yield curve and other leading economic indicators, suggest the possibility of a global economic slowdown in 2024. In times of global uncertainty or geopolitical tensions, investors often turn to the U.S. dollar as a "safe-haven" asset.
- Growing National Debt: A notable rise in the federal budget deficit is raising alarms about mounting public debt, which could influence the value of the USD in the near term.