AUD/USD Forecast: bulls taking over, corrective recovery could continue

The RBA and the Federal Reserve will have monetary policy meetings this week.
AUD/USD bullish potential growing, more gains on a break above 0.7314.

Valeria Bednarik FXStreet

The Australian dollar was among the best performers these last week, surging against the greenback to 0.7258 its highest since late September amid resurgent risk appetite. The pair followed the lead of equities, which, after a soft start to the week, ended up trimming the previous week's losses. Not yet at out of the bloom, and with US mid-term elections next week, stocks could take Aussie down as fast as they take it up.

There were some solid macroeconomic releases that backed the Aussie recovery at the end of the week, although the country's quarterly inflation indicated that the RBA will remain on hold for longer, as the RBA trimmed Q3 CPI resulted at 1.8%, below market's forecast of 1.9%. Australian trade balance surplus for September jumped to $3.017 billion in seasonally adjusted terms, the largest surplus in over a year-and-a-half. August surplus was revised to $2.342B from a previous estimate of $1.604B. Such surplus was a result of a 1.0% increase in exports to the highest on record, while imports fell 1.0%. Also, the Chinese Caixin Manufacturing PMI for October came in at 50.1, surpassing September 50.0 and much better than the contraction reading expected of 49.9.

More relevant, gains were backed by hopes that China and the US could clinch a deal on trade, hopes diluted this Friday on news indicating that there's a long way to go before the US administration considers drafting a possible deal.

The Reserve Bank of Australia and the US Federal Reserve will have monetary policy meetings next week, but none is expected to be a shocker. China will release the final October services PMI and trade data at the end of the week but seems political headlines will continue overshadowing data.

The trade war between China and the US and any headline related to it will lead the way as it did this past week. Equities will also have their saying, particularly with US mid-term elections in the middle. Get ready for big noise then.

AUD/USD technical outlook

The pair is holding above the 0.7200 figure, hovering just above the 61.8% retracement of its September/October decline, somehow leaving doors open for a full retracement up to 0.7314.

The weekly chart for the pair shows that the rally stalled a few pips below a strongly bearish 20 SMA, while technical indicators have turned modestly higher, but hold within negative levels. The RSI is currently at 43, its highest since May, and while is not enough to confirm further gains ahead, for sure is the first warning for bears. In the daily chart, the pair briefly surged above a bearish 100 SMA, but settled well below it, while technical indicators advanced within positive ground, barely losing their bullish momentum near overbought territory in this last trading day of the week.

The bearish case could return if the pair losses quickly the 0.7160 level at the beginning of the week, with the next support then being the 0.7100 level, ahead of the 0.7030/40 price zone. Should the price move beyond the mentioned 0.7314, 0.7370 is tops for next week.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the AUD/USD pair is bullish in the three time-frame under study, with modest upgrades in the average targets. the conviction is stronger in the shorter term, as both in the 1 week, and - month view, the Overview chart shows that the largest accumulation of targets come above the current level, with the moving averages offering strong upward slopes. For the 3-month perspective, the number of bulls decreased to 46% from 54% but the average target is now at 0.7290 from the previous 0.7189.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.