AUD/USD Weekly Forecast: Bearish pressure mounts, 0.7531 at sight

• The Reserve Bank of Australia is having a monetary policy meeting next Tuesday.
• The greenback rallied on upbeat macroeconomic data, government spending plan.
• AUD/USD bearish potential is clear in the daily chart, immediate support at 0.7660/70.

The AUD/USD pair ended a third consecutive week with losses, settling around the 0.7700 threshold. Demand for the American currency accelerated on Friday amid a row of upbeat macroeconomic figures coupled with news on US spending plans.

US President Joe Biden is said to propose a $6 trillion budget, the largest spending program since WWII, to boost the economy. Among other things, he has called for a $2.3 trillion infrastructure proposal, although Senate Republicans are planning a counteroffer of $928 billion. President Biden has said that he would like to reach a consensus with the opposition.

Increased signs of normal economic functioning

Generally speaking, major economies have finally turned the corner on economic recovery. The developed world is finally showing some signs of normal functioning, helped by progress in coronavirus immunization and better weather. The comeback means that central banks may need to consider tighter monetary policies sooner than expected, which in turn will slow such economic progress.

In this matter, the Reserve Bank of Australia has made it clear that regardless of better macroeconomic figures, they will maintain rates on hold at least until 2024. The US Federal Reserve also pledged to maintain the ultra-loose monetary policy but faces an unexpected spike in inflation which triggers speculation of some sort of intervention. US policymakers poured cold water on such speculation, with a good degree of success for now.

Stocks managed to remain in the green through the week, while gold prices soared, with spot gold hitting $1,912.70 a troy ounce. None of them was enough to push the aussie higher against its American rival but limited AUD/USD slump.

Australian macroeconomic calendar was scarce. The country published the Westpac Leading Index, which printed at 0.2% in April, below the previous 0.45%. Q1 Private Capital Expenditure rose in the first quarter of the year by 6.3%, much better than the 2% expected.

The US confirmed the Q1 Gross Domestic Product at 6.4%, slightly below expected, but Initial Jobless Claims contracted to 406K, its lowest reading since the pandemic spread back in March 2020. Even further, the Fed’s favourite inflation measure, the core PCE Price Index, soared to 3.6% from 2.4% in April.

RBA and Nonfarm Payrolls

The US calendar includes next week the official ISM Manufacturing PMI, seen at 60.8 from 60.7 previously, and the Services PMI, expected to have improved from 62.7 to 62.9. At the end of the week, the country will publish the May Nonfarm Payroll Report. The country is expected to have added 621K new jobs in May, while the Unemployment Rate is foreseen contracting to 5.9% from 6.1% previously. Average Hourly Earnings are expected to have contracted by 0.4% YoY.  Finally, Markit will publish the final versions of its May PMIs.

On Monday, China will publish the official NBS Manufacturing PMI and the Non-Manufacturing PMI for May, while Australia will release minor data. However, on Tuesday, the country will release the AIG Performance of Manufacturing Index and the Commonwealth Bank Manufacturing PMI. Also, the RBA will have a monetary policy meeting and announce whether they decide to revise their current monetary policy or not. A change seems unlikely at this point, and policymakers will likely refrain from being hawkish.

On Wednesday, Australia will publish its Q1 Gross Domestic Product, foreseen at -1.8% from -1.1% previously. Later into the week, the country will offer May Services PMIs and housing-related figures.

AUD/USD technical outlook

The AUD/USD pair is at risk of falling further in the longer-term perspective. The weekly chart shows that the pair is ending the week right below a flat 20 SMA, while the longer moving averages are also directionless, although far below the current level. Technical indicators head south, as the Momentum is already within negative levels and the RSI hovers around 54.

In the daily chart, the bearish case is clearer. The pair settled below its 20 and 100 SMAs, while technical indicators head firmly lower within negative levels. The 200 SMA maintains a modest bullish slope around 0.7510.

The immediate support level is the 0.7660/70 area, with a break below it, exposing this year’s low at 0.7531. A decline below the latter seems unlikely for the time being. A relevant resistance is the 0.7770/80 area, followed by 0.7820. A clear advance beyond this last should open the doors for a test of the 0.7900 figure.

AUD/USD sentiment poll

The FXStreet Forecast Poll shows that the pair is set to extend its decline next week, as only 17% of the polled experts see it advancing, with an average target of 0.7660. However, the decline is expected to be short-lived, as the pair is seen bullish in the monthly and quarterly perspectives. AUD/USD is seen then recovering toward the 0.7700 price zone.

The Overview chart keeps showing that the range of possible targets is limited, particularly in the nearer-term.  The weekly and monthly moving averages are neutral-to-bearish, while the longer one has lost its previous bullish slope and turned lower in range. It seems that bears are preparing but not yet convinced.

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