AUD/USD Forecast: Going down under, Chinese data in focus

• The AUD/USD drifted lower, succumbing to the USD and a cautious view from the RBA.
• Data from China could play a key role, alongside some Australian figures.
• The technical picture is bearish for the Aussie.

AUD/USD surrenders to the greenback

The RBA Meeting Mintues painted a gray picture of the economy. The economy is growing but wages are somewhat lagging. Household debt is an issue and a weaker Australian dollar would have helped. The Wage Price Index came out only slightly above expectations Construction Work Done dropped sharply, by 19.4% in Q4 2017. 

In the US, the FOMC Meeting Minutes were quite hawkish, painting a more rosy picture of the economy, contrasting the RBA. Fed membes sent US yields and the US Dollar to higher ground, weighing on the AUD/USD.

Chinese PMI, Australian Capex

China is emerging into the New Lunar Year and the beginning of a new month features the independent Caixin Manufacturing PMI. The forward-looking gauge of the world's second-largest economy and Asutralia's No. 1 trading partner has stood at 51.5 points in January, reflecting moderate growth. Thursday also sees the publication of Australia's Private Capital Expenditure (Capex) which is closely watched by the RBA.

Also note Private Sector Credit on Wednsday among other figures. 

Here are the events that will shape the Australian dollar as they appear on the economic calendar:

US events: Powell in Play

The US calendar is jam-packed with the main event coming on Tuesday. Fed Chair Jerome Powell will testify for the first time and markets will be watching to see if he is a dove or a hawk. Note that the text of the testimony is due at 13:30 GMT, 90 minutes before he begins speaking. His views on inflation, growth, employment, and monetary policy will be closely watched. 

In addition, durable goods orders on Tuesday, an update on GDP on Wednesday, and the Core PCE Price Index on Thursday will likely provide a lot of action as well.

Here are the more critical US events from the forex calendar:

 

AUD/USD Technical Analysis - Trending down

The AUD/USD is trending down. After the climb from $0.7500 to $0.8130, the pair made a correction, which eventually turned into a downtrend. The move towards $0.8000 now forms part of the downtrend, as a higher low. 

On its way down, the pair slipped under the 50-day Simple Moving Average. It still trades above the 200-day SMA which is close to the recent low of $0.7785. Furtehr support is close by, at $0.7760, the previous trough. Furtehr support is at $0.77, a round number and a swing high in late 2017.

We may see here a narrowing wedge, but other indicators point to the downside. The RSI is below 50 and Momentum remains negative. 

In case the pair turns higher, $0.7860 was a recent high and it is followed by $0.7890 which supported the pair when it briefly recovered. Additional resistance is at $080 and $0.81. 

 

What's next for AUD/USD?

Technical point to the downside and the sluggish economy also weighs. Even if Powell provides a "Powell Put", the Aussie may not be the best currency to take advantage of this.

The FXStreet Forecast Poll shows a neutral sentiment in the near-term while this analysis leans to the downside.