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AUD/USD Forecast: break below 0.7410 exposes 0.7250 long-term support

  • USD strength wiped out in 1 week what it took Aussie bulls five weeks to achieve.
  • US-China trade war could be the main motor for the pair this week.
  • Sentiment is bearish in the short term but becomes positive in the longer term.

The AUD/USD pair trimmed this week all of the gains that so hardly achieved in the previous six ones, barely 50 pips away from the multi-month low set last May at 0.7411. The dollar benefited this week by the combined result of multiple first-tier events, including the Trump-Kim historical meeting, a hawkish Fed, a dovish ECB, and macroeconomic data that surprised to the upside in the US and disappointed abroad.

In Australia, Home Loans were the only positive figure released this week, falling by less-than-expected, anyway down in the month 1.4%. The NAB Business Confidence index plunged in May and resulted at 6 vs. the previous 11, while the index on Business Conditions also shrunk to 21 to 15. More relevant, the monthly employment report showed that the economy added 12.0K new jobs, but the breakdown was quite disappointing, as that fulltime employment declined by 20.6K while part-time jobs grew by 32.6K.

The unemployment rate decreased to 5.4% from the previous 5.5%, but because of the participation rate also decreasing from 65.6% to 65.5%. The Australian labor market will be considered near full employment with an unemployment rate of 5.0% or less.

Adding to Aussie woes were softer-than-expected Chinese figures, as Retail Sales were up by just 8.5% in May, below the previous 9.4% or the expected 9.6%. Industrial Production in the Asian country grew by less-than-expected in April, by 6.8%, while investment declined from 7.0% to 6.1%.

The macroeconomic calendar for the upcoming week is quite scarce for both economies, with the China-US trade war being probably the main motor for AUD/USD. This Friday, US President Trump approved around $50 billion in tariffs on Chinese goods, putting US indexes under pressure ahead of the weekly close, which usually weighs on the Aussie.

AUD/USD technical outlook

The AUD/USD pair corrected up to the 61.8% retracement of it April/May slump before resuming the downside, a sign that the longer-term bearish trend could resume. In the weekly chart, the pair has topped round a congestion of moving averages before resuming its decline, with the 20 SMA poised to cross below the larger ones, another sign that favors a bearish extension. Technical indicators in this time-frame have resumed their declines after nearing their midlines from below, now with strong downward slopes that also suggest further declines ahead.

In the daily chart, the pair accelerated south after breaking below a now bearish 20 SMA, while previous week's peak was contained by selling interest around the 100 SMA, which now converges with the mentioned 61.8% retracement at around 0.7660. The Momentum indicator maintains a strong downward slope at 1-month lows, while the RSI slowly decelerates its decline, but hovers around 37, also leaning the scale toward the downside. The low of this 2018 at 0.7411 is the immediate support, with the next relevant one being 0.7320, en route to 0.7250 a major bearish target. Below this last, the bearish trend will likely accelerate. Resistances for this upcoming days are Fibonacci levels at 0.7505 0.7565, 0.7615 and 0.7660. 

AUD/USD Sentiment is mixed

AUD USD sentiment forex poll June 18 22 2018

The FXStreet Forex Poll shows that for the short term, sentiment has turned down and is bearish with an average of 0.7426. Sentiment has also turned down for the next month, but the sentiment is neutral with 0.7446 as the average. For the next three months, the average forecast has not moved much, and with current prices, it turns bullish with the average standing at 0.7533.

Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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