AUD/USD Forecast: Risks remains tilted to the downside
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UPGRADEAUD/USD Current Price: 0.6420
- Cautious markets continue to weigh on the Australian Dollar.
- The US Dollar recovers strength, ahead of Powell's speech.
- Risks for the AUD/USD remain tilted to the downside.
The AUD/USD reversed Wednesday's gains, reflecting that it is not yet ready for a sustained recovery. The US Dollar strengthened across the board as markets remain cautious, awaiting Powell's Friday speech at the Jackson Hole symposium.
The Australian Dollar continues to be influenced by the outlook of the Chinese economy and cautious market sentiment. The focus is on Jackson Hole, where Federal Reserve Chair Jerome Powell will deliver a speech on Friday. His words are likely to trigger volatility across financial markets, but it is not clear what he may say.
The Fed is data-dependent, and markets do not expect a rate hike at the September FOMC meeting. However, despite showing some weaknesses, the recent round of US economic data is still better than other economies and keeps the door open to more hikes if the Fed deems it necessary. Comments from Fed's Harker and Collins on Thursday suggest that rates may not rise further, but at the same time, in line with Powell's latest comments, they emphasize the commitment to bring down inflation.
Data from the US on Thursday came in mixed. Durable Goods Orders declined 5.4% in July, more than the expected 4% decline. Initial Jobless Claims dropped to 230,000, below the market consensus of 240,000. The Chicago Fed National Activity Index rose from -0.33 to 0.12, surpassing expectations.
The US Dollar Index rebounded and rose back to the 104.00 area, heading towards the highest daily close since early June. US Treasury yields also rebounded. However, stocks on Wall Street turned negative after a positive opening, reflecting risks about Powell's speech and the possibility of an extended period with high interest rates or even higher rates.
Powell's speech will likely be decisive for the direction of AUD/USD. Even after his speech, fundamental factors will continue to favor the US Dollar. However, it could trigger a more significant correction of the US Dollar, favoring an upward move in the pair.
AUD/USD short-term technical outlook
The AUD/USD failed to retake 0.6500 and weakened, falling all the way to 0.6420. The bearish trend was reinforced, and technical indicators have deteriorated for the Aussie. The 20-day Simple Moving Average (SMA) stands at 0.6510, and a daily close above would point to a more significant recovery or a consolidation. Below 0.6500, the Aussie seems vulnerable.
On the 4-hour chart, AUD/USD has fallen below the 20-SMA but remains above an uptrend line that offers support around 0.6415. A break below that line could trigger more losses. Technical conditions favor the downside for the following hours, but as long as it remains above 0.6415, the declines seems limited. The Relative Strength Index and Momentum have turned south. If the pair breaks above 0.6460, it would improve the outlook for the Aussie, at least for a few hours.
Support levels: 0.6415 0.6380 0.6360
Resistance levels: 0.6460 0.6500 0.6530
AUD/USD Current Price: 0.6420
- Cautious markets continue to weigh on the Australian Dollar.
- The US Dollar recovers strength, ahead of Powell's speech.
- Risks for the AUD/USD remain tilted to the downside.
The AUD/USD reversed Wednesday's gains, reflecting that it is not yet ready for a sustained recovery. The US Dollar strengthened across the board as markets remain cautious, awaiting Powell's Friday speech at the Jackson Hole symposium.
The Australian Dollar continues to be influenced by the outlook of the Chinese economy and cautious market sentiment. The focus is on Jackson Hole, where Federal Reserve Chair Jerome Powell will deliver a speech on Friday. His words are likely to trigger volatility across financial markets, but it is not clear what he may say.
The Fed is data-dependent, and markets do not expect a rate hike at the September FOMC meeting. However, despite showing some weaknesses, the recent round of US economic data is still better than other economies and keeps the door open to more hikes if the Fed deems it necessary. Comments from Fed's Harker and Collins on Thursday suggest that rates may not rise further, but at the same time, in line with Powell's latest comments, they emphasize the commitment to bring down inflation.
Data from the US on Thursday came in mixed. Durable Goods Orders declined 5.4% in July, more than the expected 4% decline. Initial Jobless Claims dropped to 230,000, below the market consensus of 240,000. The Chicago Fed National Activity Index rose from -0.33 to 0.12, surpassing expectations.
The US Dollar Index rebounded and rose back to the 104.00 area, heading towards the highest daily close since early June. US Treasury yields also rebounded. However, stocks on Wall Street turned negative after a positive opening, reflecting risks about Powell's speech and the possibility of an extended period with high interest rates or even higher rates.
Powell's speech will likely be decisive for the direction of AUD/USD. Even after his speech, fundamental factors will continue to favor the US Dollar. However, it could trigger a more significant correction of the US Dollar, favoring an upward move in the pair.
AUD/USD short-term technical outlook
The AUD/USD failed to retake 0.6500 and weakened, falling all the way to 0.6420. The bearish trend was reinforced, and technical indicators have deteriorated for the Aussie. The 20-day Simple Moving Average (SMA) stands at 0.6510, and a daily close above would point to a more significant recovery or a consolidation. Below 0.6500, the Aussie seems vulnerable.
On the 4-hour chart, AUD/USD has fallen below the 20-SMA but remains above an uptrend line that offers support around 0.6415. A break below that line could trigger more losses. Technical conditions favor the downside for the following hours, but as long as it remains above 0.6415, the declines seems limited. The Relative Strength Index and Momentum have turned south. If the pair breaks above 0.6460, it would improve the outlook for the Aussie, at least for a few hours.
Support levels: 0.6415 0.6380 0.6360
Resistance levels: 0.6460 0.6500 0.6530
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