AUD/USD Forecast: Bullish-to-bearish trend change confirmed

"Once is an Accident, Twice is a Coincidence, Three Times is a Pattern" -  The third attempt to capitalize on the break above the 0.80 handle fell apart last week after the Reserve Bank of Australia (RBA) Governor Phillip Lowe said that rising rates abroad have no automatic implications for Australia.

The selling pressure got aggravated after S&P lowered Chinese sovereign credit rating, for the first time since 1999, to A+ from AA-. This, coupled with a sharp slide in commodity prices, especially copper and gold, further weighed over the Aussie Dollar.

The USD side of the story turned bullish as the Fed finally announced the starting date of the balance sheet taper and hinted at December rate hike. The dot plot chart said the Fed could raise rates three times in 2018.

Consequently, AUD/USD breached the key rising trend line to the downside.

Economic Calendar

Monday: ECB President Draghi will make a speech on Monday night, along with three voting committee members of the US Federal Reserve — William Dudley, Bill Evans and Neel Kashkari. Fed officials are likely to reiterate the scope for one more rate hike in December.  The USD could strengthen if Kashkari surprises the market with hawkish talk.

Tuesday: RBA's Bullock [Assistant Governor for financial stability] in a panel discussion in Sydney - "where to from here?". Fed chair Janet Yellen’s keynote address - the central bank chief is likely to reiterate the message delivered last week.

Wednesday: US durable goods orders (August) and speech from Fed's Bullard and Rosengren. USD rally could gather pace if core durable goods orders beat estimates and Fed policymakers step into the hawkish line.

Thursday: RBA Guy Debelle speech in London "central bank independence in retrospect"

Friday: Private sector credit for August (RBA), China Caixin PMI, US personal spending and income report. Better-than-expected personal spending number could boost the US dollar.

Technicals - Bullish-to-bearish trend change confirmed

Weekly chart

• The weekly chart above shows repeated failure to hold above the 0.80 handle and bearish outside the week candle.

Daily chart

• The breach of the rising trend line coupled with an end of the day close below the 50-day moving average [topped out] indicates the tide has turned in favor of the bears.

View

• The currency pair looks set to test 0.7808 [Aug 15 low] in the short-run. A violation there would expose the 100-DMA, which is seen sloping higher to 0.7770 over the next few days.
• Only an end of the day close above 0.81 would revive the bullish view.