• Australian dollar underpinned by equities, but won’t last.
  • China grew at its slowest pace in 27 years in the second quarter.
  • AUD/USD may extend advance up to 0.7100 before bulls gave up.

The AUD/USD pair is finishing with gains a second consecutive week, having reached 0.7081, a level last seen late April this year. The Aussie found support in the positive momentum of US equities, as despite seesawing this week, remain at record highs, but also gathered some strength from a mixed employment report, which showed that the country added  just a net 500 jobs in June, although full-time positions increased by 21.1K while part-time ones decreased by 20.6K, read as positive by market’s players. The unemployment rate in the same month remained steady at 5.2%. Beyond employment data, Australia released the Minutes of the latest RBA Meeting’s Minutes, which showed the central bank is ready to adjust interest rates if required. The central bank cut rates for a second consecutive month to a record low of 1.0%.

One word about the employment report: the mixed numbers mean nothing for the RBA at least when considering the future of monetary policy. Australian wage growth is currently running at 2.3% YoY, well below the 4.0% considered “healthy” average. Depressed wages are a drag for inflation, and subdued inflation has resulted in the RBA cutting rates. A stronger local currency offsets any probable positive effect rate cuts could have.j

Chinese data released at the beginning of the week was sour, as the country’s Q2 GDP came in as expected at 6.2%, the lowest reading in almost three decades. Retail Sales and Industrial Production, however, posted impressive headlines, although reading between lines, the reports showed that consumption decreased and that the upbeat figures could be attributed to infrastructure investment, another consequence of the US-China trade war. It shouldn’t surprise that at some point in the near future, Chinese economic woes gave Aussie bulls a reality check.

Australian and Chinese macroeconomic calendars will remain ultra-light next week, with no relevant data coming from those economies. The US will present some first-tier figures, with preliminary  Q2 GDP being the most relevant.

AUD/USD Technical Outlook

The AUD/USD pair is above its 20 SMA in the weekly chart, although the 100 SMA is crossing below the 200 SMA, both some 400 pips above the current level. The Momentum indicator remains depressed below its 100 level, while the RSI indicator aims modestly high at around 50, all of which falls short of indicating further gains ahead. Nevertheless, the positive momentum could continue, should Wall Street keeps cheering easy money.

In the daily chart, the pair managed to surpass its 20 and 100 SMA, with the shortest accelerating north, but the 200 DMA stands in the way of further gains, heading nowhere around 100. The Momentum indicator bounced from its 100 level, but its strength is limited, while the RSI eased within positive levels. Give or take, the chart is saying the same as the weekly one, reflecting the latest gains but failing to confirm another leg higher at sight.

The rally could extend up to the mentioned 0.7100 price zone, and further up to 0.7150, but bulls are not prepared to break this last resistance. Supports come at 0.6990, 0.6950 and the 0.6900 area.

AUD/USD sentiment poll

According to the FXStreet Forecast Poll, the AUD/USD pair has reached at top, as it’s seen consolidating this week, with an even amount of bulls and bears, falling afterward, with bears up to 75% of the polled experts in the monthly view. Dollar’s weakness limits the average downward target to around 0.6950. Despite bears maintain the lead quarterly basis, the pair is seen then, on average at 0.6964.

The Overview chart, however, shows that moving averages have turned higher, although only the weekly one surpassed its previous monthly high. As time goes by, the chart shows that chances of a bearish continuation are larger.  

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