- US-China trade war to highlight the weekend, expect some action at the weekly opening.
- AUD/USD battle around 0.7300 continues, fresh monthly high skews the risk to the upside.
The Australian dollar was among the best performers this week, underpinned by a rally in US equities after dovish words from the Fed's head Powell, with the AUD/USD pair hitting a 2-month high of 0.7343. There was no follow-through, but the pair has held above the 0.7300 level at the end of the week, somehow anticipating further gains ahead, particularly considering the commodity-linked currency survived the collapse of crude oil prices to fresh yearly lows. The absence of macroeconomic figures coming from Australia may have added to the positive tone of the currency.
There's a big risk factor in the way. The US-China trade war, with tensions mounting ahead of a key bilateral summit between the leaders of both countries within the G-20 this weekend. Ahead of the event, China has given some signs of ease in its posture, way short of US pretensions. Meanwhile, President Trump said that while China seems now more interest in achieving a deal, he "doesn´t know" if he wants to do it. Whether they will come to a deal of the situation escalate, is something the market will know over the weekend, with the related reaction expected in the weekly opening.
The Australian macroeconomic calendar will be quite busy next week, with an RBA meeting included. No changes in monetary policy are expected with attention centered on the statement's wording. The country will also release 3 GDP, foreseen at 0.6% vs. the previous 0.9%. October Retail Sales and Trade Balance figures will also be out next week. Nevertheless, trade-war headlines will likely set the tone.
USD strength, on the other hand, will depend on whether the market gets to a consensus over what is the new stance of the Federal Reserve about "neutral" rates. The greenback got sold off after Chief Powell, speaking in New York, said that rates are "just below" neutral, signaling a possible pause in rate hikes, but the FOMC Minutes released one day after, making speculative interest hesitate about whether or not, or when the US will pause its rate hike cycle. Another factor that could affect the pair to a lesser extent is the release of the monthly employment report next Friday. In the meantime, trade war headlines will dominate.
AUD/USD technical outlook
The weekly chart shows that the pair has trimmed most of the previous weekly losses, reversing an early slide below a still bearish 20 SMA but developing above this last for most of the last three weeks. The pair remains well below the 100 and 200 SMA, which lack directional strength, while technical indicators extend the battle around their midlines. Overall, the upward potential remains limited in the longer run.
In the daily chart, however, things look a bit better. The pair settled above a bullish 20 SMA, which crossed above the 100 SMA both in the 0.7220/40 region, while technical indicators entered bullish ground, the Momentum maintaining its bullish slope but the RSI lacking directional strength at around 58. Beyond 0.7340, the pair would likely extend its gains toward 0.7400, en route to 0.7500, with gains beyond this like still unlikely. Only below 0.7200, the risk will return to the downside.
AUD/USD sentiment poll
According to the FXStreet Forecast Poll, the pair won't be able to win the battle with 0.7300, as it's seen bearish in all the time-frame under study, with sellers above 50% in all of them, although some optimistic banks seeing in close to 0.780 in the upcoming months. Surprisingly, the number of bears increased, but the average target didn't change much, with the pair seen targeting now 0.7270 from 0.7261 previously. The Overview chart, however, shows that moving averages maintain their bullish slopes, particularly strong in the 1-week and 1-month views. In the 3-month perspective, the rage of possible targets is quite wide, but the largest accumulation comes between 0.7000 and 0.7200.
Related content:
EUR/USD Forecast: unconvinced EUR bulls quickly capitulated
USD/JPY Forecast: Two steps up, one step down, Trump's trade and NFP eyed
USD/CAD Forecast: Oil is still an issue, BOC and jobs promise action
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.