AUD/USD Forecast: battle for direction begun

The Australian dollar got some market favor these last few days but was unable to overshadow the greenback's prevalent strength, and the pair ended marginally lower, around the 0.7500 figure. The fact that weekly basis, it posted a higher low sounds an alarm for those looking for a steeper decline in the pair, moreover considering that there was no fundamental reason for the Aussie to change course.

The Reserve Bank of Australia released the Minutes of its latest meeting at the beginning of the week, and while reiterating that the next move is more likely to be up than down, they maintain their on-hold stance and hinted no hikes in the foreseeable future. Australian rates have been at a record low of 1.5% since August 2016.

Data released these last few days support the RBA's view, as wages' growth remained at 2.1% during the first three months of the year, near record lows. The April employment report was overall positive, despite the unemployment rate ticked up to 5.6%, as more people entered the labor market, with the participation rate up to 65.6. The country created 22,600 new jobs, better than the 20K expected, with full-time jobs rising by 32,700 positions, while part-time jobs decreased by 10K, a positive sign as Australian's labour market has a high spare capacity, yet nothing game-changer for the RBA.

Chinese data out these last week pointed out that the world´s second-largest economy keeps losing upward steam, as both retail sales and investment were below market's expectations in April, also below March figures. Retail sales were up 9.4% YoY, a 4-month low, while fixed asset investment grew 7.0%, its slowest pace of growth in almost two decades.  In the meantime, China and US officers are gathered in Washington in talks aimed to prevent a trade war.

Gold prices another factor that can affect the commodity-linked Aussie is at 2018 lows, sub-1.300,00 on the back of resurgent hopes of a faster pace of tightening in the US.

The Australian and Chinese macroeconomic calendar has little to offer this upcoming week, with stocks and yields setting the tone.

AUD/USD technical outlook

The AUD/USD pair remained contained below the 38.2% retracement of the previous 4-week's decline at 0.7565 for a second consecutive week,  and technical readings in bigger time frames favor a downward extension for the upcoming sessions, as in the weekly chart, the pair continues developing below all of its moving averages, which anyway painted a mixed picture, lacking directional strength and with the 20 SMA above the larger ones. The Momentum indicator in the mentioned chart lost upward strength within negative territory, while the RSI heads lower with limited strength, currently at 39, maintaining the risk skewed to the downside. In the daily chart, however, the pair is around a bearish 20 SMA and also the 23.6% retracement of the mentioned decline, while technical indicators turned flat around neutral readings, somehow suggesting decreasing selling interest. To resume its decline, the pair would need to break below 0.7411, the low set this May, with a break below the level favoring a slide toward 0.7360 first, and 0.7250 later. The mentioned 0.7565 level is an immediate resistance, while to reverse the bearish trend, the pair will need to surpass the 0.7640/60 region, where it has multiple relevant lows and the 61.8% retracement of the mentioned decline.

AUD/USD sentiment poll

Sentiment around the pair has turned neutral according to the FXStreet forecast poll, with an equal percentage of bears and bulls both in the weekly and in the monthly perspectives, and just a minority seeing the pair neutral. Anyway, is a big change from the previous week, when bulls were a majority everywhere.  In the three time-frames under study, the pair is seen holding around the 0.7500 region, although the dispersion range in the 3-month view is among the widest for this week. All in one, this signals indecision around the pair.  Nevertheless, the Overview chart shows that the bearish trend is clear short term, and fades as time goes by, turning almost neutral in the 3-month perspective when the average target is closer to 0.7600.