AUD/USD Forecast: recovery falling short of changing bias
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AUD/USD sentiment poll suggest decline is not over yet, gains beyond 0.7600 still unclear
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Gold and equities bounced Friday, backing the Aussie, but hold at bearish levels.
The AUD/USD pair bottomed this week at 0.7345, its lowest in over a year, weighed by dovish RBA Minutes and dominant fears about the escalating trade war that started between China and the US and began spreading worldwide.
The RBA's Minutes surprised negatively as the document omitted a crucial piece of language, the final line saying "members agreed that it was more likely that the next move in the cash rate would be up, rather than down." Investors quickly dumped the Aussie on speculation policymakers have downgraded the outlook for interest rates. About the troubled housing market, Minutes said that "growth in housing credit had slowed over the preceding year, especially to investors," adding that "an easing in the demand for credit as well the Australian Prudential Regulation Authority's supervisory measures and tighter credit standards had been helpful in containing the build-up of risk on household balance sheets, although the level of household debt remained high."
Moving into the week, market players became concerned about upcoming GDP growth, as the Westpac Leading Index fell in May to -0.2 from 0.2 previously, pointing to slowing growth in the second half of the year.
Adding pressure on the Aussie, gold prices fell to fresh 2018 lows alongside with equities, hurt by news that the EU and Turkey will start imposing tariffs on US good, as a response to Trump's tariffs on aluminum and steel. China also retaliated back and policymakers said that will battle up to the end, given the unpredictable trade actions taken by the new administration. Risk aversion ebbed by the end of the week on headlines indicating that White House officials are trying to restart talks with China to prevent the trade war from escalating further.
The greenback, which benefited from risk-negative sentiment at the beginning of the week, gave up on Thursday amid softer-than-expected US data and concerns that the trade war will be a major drag for the US economy.
This upcoming week, Australia will have nothing to offer from the macroeconomic point of view, while the US will post some interesting figure, none of them a first-tier, including Durable Goods Orders and core PCE inflation.
AUD/USD technical outlook
The AUD/USD pair formed a double bottom in the mentioned weekly low, up from the level but by less than 100 pips, and barely enough to trim weekly losses, falling short of confirming an upcoming reversal. In the weekly chart, the pair is far below its moving averages, which converge in a tight range around 0.7640/60, but with the 20 SMA clearly being the fastest, leaning the risk toward the downside. Technical indicators in the mentioned chart have lost directional strength, but remain within negative levels and below their June highs, also achieved in bearish territory, a sign that bulls remain sidelined.
In the daily chart, the pair seems to be just correcting oversold conditions, as the price remains far below bearish moving averages, while the RSI indicator bounces from oversold readings but stands currently at 40, while the Momentum remains flat dip into the red. The weekly high at 0.7453 is the immediate resistance en route to th3 0.7520 price zone. Beyond this last, the pair could need the 0.7600 figure but should clear the next resistance area, at 0.7640/60 to confirm a mid-term continuation. The main support is the yearly low at 0.7345, with a break below it exposing 0.7250 a major long-term static support.
AUD/USD sentiment poll
The FXStreet Forecast Poll shows that the pair passed from bearish to bullish in the weekly outlook, as bears decreased from 67% to 29% but the average target little changed, currently at 0.7449. The pair is expected to extend its recovery after reaching a fresh 2018 low but despite the positive sentiment, gains beyond the 0.7600 are barely seen for the upcoming three months, and on the contrary, the largest accumulation of possible bearish targets is around or below the current level.
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