AUD/USD Forecast: Near term corrective decline may not be over yet

AUD/USD Current Price: 0.6824

• Mixed Chinese data undermined the market mood at the beginning of the week.
• The Reserve Bank of Australia will present the Minutes of its latest meeting on Tuesday.
• AUD/USD near-term picture suggests the corrective decline could continue.

The AUD/USD pair extended its decline on Monday, further easing from last week’s peak at 0.6894. The pair bottomed at 0.6786 during Asian trading hours as mixed Chinese data undermined the mood. However, the US Dollar resumed its decline, ending the American session on the back foot.

 China´s Gross Domestic Product (GDP) was up by 6.3% in the second quarter of the year compared to a year earlier, missing the 7.2% expected. July Retail Sales were up a modest 3.1% YoY, decreasing sharply from the 12.7%  YoY previous and also missing the market forecast. On a positive note, Industrial Production rose more than anticipated, up 4.4% YoY in July. Australia did not publish macroeconomic figures, although this Tuesday, the Reserve Bank of Australia (rba) will release the minutes of its latest meeting. The RBA kept the cash rate on hold following two unexpected 25 basis points (bps) rate hikes, finally pausing its tightening cycle. The document may shed some light on what Governor Philip Lowe & co plan for the near future.

Later in the day, the United States (US) will publish June Retail Sales, expected to increase by 0.5% in the month. The country will also release June Capacity Utilization and Industrial Production.

AUD/USD short-term technical outlook

The AUD/USD pair bounced from the aforementioned intraday low and trades in the 0.6820 price zone. The daily chart shows that AUD/USD flirted with the 38.2% Fibonacci retracement of its 0.6598/0.6894 rally at 0.6780 and currently hovers around the 23.6% retracement of the same run. Meanwhile, technical indicators remain directionless in the 0.6680/0.6720 price zone, suggesting bulls retain control. Finally, technical indicators offer modest bearish slopes but remain well into positive ground, limiting chances of a stepper decline, particularly if the aforementioned Fibonacci level holds.

The near-term picture suggests AUD/USD may resume its decline as the pair develops below a bullish 20 SMA while the Momentum indicator extends its slide within negative levels. At the same time, the longer moving averages gain upward traction far below the current level, while the Relative Strength Index (RSI) indicator heads nowhere at around 55, limiting chances of a sudden US Dollar run.

Support levels: 0.6780 0.6740 0.6705

Resistance levels: 0.6870 0.6905 0.6940

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