AUD/USD Forecast: first signs the tide may change

AUD/USD seen falling next week, but much will depend on data.
Chinese growth figures and the RBA to take center stage.

Valeria Bednarik FXStreet

Little happened around the AUD/USD pair these last few days, poised to end the week little changed at around the 0.7100 figure. An attempt to advance was capped by sour Chinese data, and dollar's broad strength. Chinese Industrial Production recorded the worst contraction in more than 7 years, down by 14.0% n the first two months of the year, the only relevant macroeconomic figure released this week, but enough to spook Aussie bulls. Australia didn't release any relevant data.

The US and China had another round of trade talks, which ended with Mnuchin stating that there were 'constructive' and not much more. The issue is in a 'good' pause, as the lack of progress seems to not being affecting negatively the market.

The pair has been unable to find a certain direction for almost two months already, but that could come to an end this next week, as there are multiple first-tier data coming from all the parts involved, that is China, Australia, and the US.

Official PMI for both, China and Australia will open the weekly calendar. Activity in the Chinese manufacturing and services sector is seen ticking lower in March. Worse-than-expected figures could fuel the ongoing fears and spread like wildfire across the board. Within the following days, the most relevant event will be the RBA monetary policy meeting Tuesday, with a dovish twist probably being priced in ahead of the meeting.

Worth noting, the Aussie has been among the most reluctant to ease to dollar's strength, particularly adding to the picture falling base metals' prices led by gold. However, if inflation and housing-related data to be out next week miss the market's expectations, AUD buyers may finally give up.

AUD/USD Technical Outlook

The pair hovers around the 0.7100 figure, and the weekly chart shows that, once again, sellers capped the advance around a mild bearish 20 SMA, while the 100 and 200 SMA maintain their modest downward slopes over 300 pips above the shorter one. Technical indicators, however, are showing an increased upward potential yet to be confirmed, as the Momentum extended its advance, entering positive ground, while the RSI hovers around 45.

In the daily chart, the pair has spent the week capped by a directionless 100 DMA, and, in fact, intraday advances stalled well below it in the last couple of days, struggling to remain above and also flat 20 DMA. Technical indicators in this last timeframe are directionless around their midlines.

Overall, the pair is neutral, and despite some bullish hints coming from the weekly chart, a sustainable advance doesn't seem likely unless the pair advances above 0.7250, a level that it didn’t test since last February. The main supports come at 0.7055 and the 0.6980 as once below this last, bears will likely take over the pair. Resistances, on the other hand, come at 0.7170 and the mentioned 0.7250 level.

AUD/USD sentiment poll

The FXStreet Forecast Poll shows that the bearish sentiment is strong as 89% of the polled experts see the AUD/USD pair falling next week, with an average target of 0.7032, the lower end of the latest range. For the 1 month perspective, bears also lead with 50% and with the pair seen holding below the 0.7100 level. Finally, and for the 3-month view, bulls and bears are almost equal with 44% and 42% respectively, a sign that the upward scope remains limited despite the dollar is seen correcting lower.

In the Overview chart, moving averages are neutral, another hint suggesting that the tide may change, despite being too early to confirm so.

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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