AUD/USD Forecast: US-China trade talks saved the day
|- The Australian dollar surged on the back of trade hopes.
- Speculation that the RBA could take rates down to zero limits the upside for the AUD.
- AUD/USD has little chances of extending its gains as long as it holds below 0.6900.
The Australian has dollar managed to extend its gains against the greenback above the 0.6800 level for the first time this month, holding on to substantial gains weekly although below the level.
The Aussie is intrinsically bearish in the long run amid local jitters and a clearly dovish Reserve Bank of Australia that not only cut rates to record lows of 0.75% but also left doors open for a cut down to zero in its latest meeting.
Sour data vs trade deal hopes
Australian data released these last few days have continued signalling sluggish macroeconomic developments, with Consumer Confidence plummeting in October according to Westpac, as the index resulted at -5.5% from a previous -1.7%. Nevertheless, renewed hopes that the US and China will come to an agreement in their trade war, boosted the AUD by the end of the week.
The market’s sentiment remained sour throughout the first half of the week amid tensions between the US and China, suffering a sharp U-turn Thursday, as not only news signalled a possible breakthrough in the trade war, but also a possible new deal for Brexit that will allow the UK to leave the EU with an agreement.
Newsfeeds were flooded with encouraging headlines in the last two days, with China offering to completely remove the requirement for forced joint ventures in financial services by Jan 2020, and US President Trump hinting a likely trade deal through twitter.
The upcoming week will start with China releasing plenty of relevant data, included September Trade Balance and inflation. Usually strong catalysts, the figures could be overshadowed by trade war developments and pass unnoticed. Later in the week, Australia will release September employment data. By that time, there could be some definitions on the trade front, therefore making of the report a more relevant catalyst. China will close the week releasing Friday, September Retail Sales and Q3 GDP, this last seen at 1.5% from a previous 1.6%.
AUD/USD Technical Outlook
The AUD/USD pair is developing a double floor figure yet to be completed. The neckline of the figure comes at around the 50% retracement of the 0.7081/0.6670 decline around the 0.6875 and just shy of the high set in September at 0.6894. The 38.2% retracement of the mentioned decline comes at 0.6825, providing a first relevant resistance for the upcoming days.
In the weekly chart, the pair continues developing below a strongly bearish 20 SMA while the larger moving averages also head south far above the shorter one. Technical indicators have recovered just modestly within negative levels, lacking sufficient strength to anticipate a longer-term recovery.
In the daily chart, the positive momentum is limited, as the pair is now advancing above a bearish 20 SMA, while technical indicators barely entered positive ground, anyway skewing the risk to the upside. The downside remains exposed, with a break below 0.6770 opening doors for a retest of the multi-year low at 0.6670.
AUD/USD sentiment poll
The FXStreet Forecast Poll shows that the American currency could extend its decline in the next few days, as the most polled experts see the AUD/USD pair bullish with most targets in the 0.68/069 area. The bullish potential, however, fades as time goes by, with bears taking the lead in the longer-term perspectives and the pair seen below 0.6800.
In the Overview chart, only in the weekly perspective, the most targets accumulate above the current level, with a more even range ahead. Moving averages are neutral-to-bearish. Overall, the risk remains skewed to the downside as the pair is hardly seen recovering the 0.7000 level.
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