AUD/USD Forecast: equities saved the day, but Aussie remains unattractive

  • AUD/USD poised to test the 0.7000 level in the near term.
  • Australian dollar still weighed by the latest RBA's stance change over rate moves.

There was little action around the AUD/USD pair this past week, having spent it in an 80 pips' range and at the lower end of the previous weekly span. In fact, and dismissing the flash crash from early January, the pair clinched a fresh low of 0.7053. The dollar strengthened throughout the first half of the week, losing its shine Thursday, on headlines indicating a stalemate in US-China trade talks, as despite optimistic words from officials, they ended up recognizing that no progress has been made, and softer-than-expected US data. Things improved Friday with more trade talks related headlines, as a Chinese newspaper reported that the US and China reached consensus on key issues. More work needs to be done, according to both parts, but equities bounced nicely, helping the AUD/USD recover some ground in the final trading day of the week.

The Aussie had no macro reasons to run, as housing-related data disappointed big, with Home Loans falling 6.1% in December, and Investment Lending for Homes also down in the same month by 4.4%. The latest decision of the RBA to change its stance toward rate hikes to neutral, meaning equal odds for rate hikes than rate cuts, was a result of the tumbling property market, therefore data related to it will hit the AUD harder. The country also reported the NAB Business Confidence and Business Conditions indexes, both beating expectations but still sluggish. Consumer Inflation Expectation as per the Melbourne Institute's estimates, rose to 3.7% in February vs. 3.5% in January.

China provided some mixed figures these last few days, with the trade balance improving but inflation down. Chinese trade data with the US showed that Imports from the US declined by a whopping 41% while exports to the country were down by 2.4%, leaving a trade surplus of $27.3B, another sign that tariffs are not working as Trump planned them.

This upcoming week will start with the release of RBA Meeting's Minutes on Tuesday, and the Westpac Leading Index on Wednesday. The most relevant event, however, will be January employment data to be released on Thursday. There won't be relevant Chinese news next week, beyond trade war updates.

Stocks saved the day for Aussie, but the commodity-linked currency lacks self-strength.

AUD/USD Technical Outlook

The pair remains bearish according to readings in the weekly chart, ending it above the 0.7100 level but below a bearish 20 SMA at 0.7160, while the larger ones gain downward traction far above the current level. Technical indicators in the mentioned chart have no directional strength, holding in bearish territory.

In the daily chart, the picture is quite alike, with the pair developing below its moving averages and technical indicators heading nowhere below their midlines. The risk of a steeper decline will increase if the pair losses 0.7070, the immediate support, with the next possible bearish targets at 0.7000 and 0.6920. Resistances from the current level are at 0.7145, 0.7200 and the 0.7250 price zone.

AUD/USD sentiment poll

The FXStreet Forecast Poll shows that the pair will likely remain under pressure, as bears are a majority in the 1-week and 1-month perspectives. Bulls take some advantage in the quarterly view, standing at 49%. In the three time-frames under study, the pair is seen averaging 0.7100, not far from the level.

In the Overview chart, moving averages offer a neutral-to-bearish perspective, but the pressure persisting in the shorter perspective, with most possible targets well below the current level. In the following periods, there's quite an even spread of possible targets above and beyond the current level, signaling uncertainty, as the pair is trapped between dollar's demand and equities outstanding performance.  

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