AUD/USD Forecast: China still the center of the universe for the Aussie

  • Chinese data released these days confirms deeper economic slowdown after 2 decades of growth.
  • Australian employment figures and US Federal Reserve meeting awaited for direction.

Aussie bulls gave a good battle to regain their poise but lost it at the end of the week. The AUD/USD pair advanced steadily ever since gapping lower at the weekly opening, trimming all its gains and falling to a fresh 6-week low this Friday, on the back of Chinese jitters.

The tug of war between China and the US continues, although at highly polite levels, with both economies giving baby steps toward a deal, with some bumps in the road. China announced earlier this week that will cut back tariffs on American cars, sending tariffs down to 15% from the current 40%, probably starting January 1st. Also, China bought this Thursday 1.13 million tonnes of US soybeans, first purchase since the trade war started. Representatives from both parts claim for progress in negotiations,  although talks are still pending, and the detention of Huawei's CFO have partially dented the good mood.

Chinese data released this week was quite discouraging, starting with November inflation which declined by 0.3% MoM and increased by 2.2% YoY, below the previous 2.5%, and ending with Retail Sales that increased by 8.1% YoY, well below the previous 8.6% or the expected 8.8%. Industrial Production in the same period rose 5.4%, also falling short from the market's expectations of 5.9%, and the previous 5.7%. After two decades of sharp expansion, growth in the world second's largest economy has slowed sharply, and this data just confirms it. Australian mining-based economy is quite dependent on the Asian giant, which consumes most of its production. The scarce macroeconomic calendar in Australia will be partially compensated next week with the release of employment data on Thursday, right after the US Federal Reserve meets for the last rate hike of this year and maybe the last in some time.

Market players are not yet convinced that the trade war will come to a happy ending. Stocks are the best sign of that, alongside commodity prices, under pressure, and near yearly lows. The Aussie has little chances of regaining the upside if those assets remain under pressure.

 AUD/USD Technical Outlook

As said, the pair heads into the weekly close at its lowest in six weeks, below the 61.8% retracement of the 0.7020/0.7399 rally.  The weekly chart shows that the pair resumed its decline with a vengeance below a firmly bearish 20 SMA after a brief spike above it, while the Momentum indicator remains directionless around its mid-line and the RSI heads south around 42, all of which favors a continued decline ahead.

In the daily chart, a bearish 100 DMA contained advances, while technical indicators detained their upward corrections right around their midlines before turning sharply lower, maintaining their downward slopes, also supportive of a bearish extension for the upcoming sessions. The immediate support comes at the 0.7120/30 price zone, where the pair has multiple daily highs from September/October, followed by 0.7060, en route to the yearly low of 0.7020. Resistances come at 0.7220, 0.7260 and the 0.7300 figure.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the pair will keep holding above 0.7000 in the upcoming three months, seen down only next week, to recover some ground afterward. Bears are up to 75% weekly basis, with an average target of 0.7124, decreasing to just 30% in the 1-month view, with the price then seen around 0.7224. The 3-month perspective is also dominated by bulls, but the average target comes at 0.7191, down from the previous 0.7244.

In the Overview chart, the moving averages maintain bearish slopes in the 1-week and 1-month views, picking up just modestly in the 3 months perspective, although with the largest accumulation of targets in this last, still between 0.70 and 0.72.

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