AUD/USD Forecast: no free-fall yet at sight, neither a relevant bounce

The Aussie has seesawed violently at the beginning of this ending week, unable to retain its Monday gains and finishing it with a sour tone at around 0.6730 against its American rival. Escalating US-China tensions and fears that the global economic slowdown will steepen, resulted in the AUD/USD pair falling to 0.6689. The absence of relevant Australian data, and minor, yet dismal figures released throughout the week, added pressure on the commodity-linked currency.

Positive mood meant to be temporal

The announcement of new, reciprocal tariffs between China and the US  unleashed panic at the weekly opening, although US  President Trump tried to cool down such fears, claiming that Chinese representatives called to restart talks. The news was later denied by China, with Hu Xijin, editor-in-chief of the Global Times, tweeting that “based on what I know, Chinese and US top negotiators didn't hold phone talks in recent days. The two sides have been keeping contact at a technical level, it doesn't have significance that President Trump suggested. China didn't change its position. China won't cave to US pressure.” Things finally improved Thursday, following comments from the Chinese Commerce Ministry. His spokesman reported that they oppose to an escalation of the trade war, and want to resolve it through a calmer attitude. Both trade teams have been in touch and will resume talks this September. Still, it seems unlikely the matter will be resolved anytime soon. Therefore, the global economic downturn will continue to progress, with fears of recession most likely determining investors’ decisions.

The little data released by Australia disappointed, as the August ANZ Business Confidence  Index dropped to -52.3  from -44.3 in July, while the Activity Outlook in the same period slumped to -0.5% from 5%. Private Capital Expenditure in Q2 declined by 0.5%, well below the 0.5% advance expected, while Building Permits fell by 9.7% in July when compared to the previous month, down by a whopping 28.5% in its yearly estimate.

The Dollar gathered strength from relief news related to the trade war, surging alongside equities and government bond yields. The AUD/USD pair was trapped in the middle, unable to bounce despite the comeback in stocks markets.

Growth data and trade war to lead the way

This Saturday, China will release the official Manufacturing PMI for August, seen at 49.7, and the Non-Manufacturing PMI, expected at 53.6. Worse-than-anticipated numbers will likely weigh on the pair at the beginning of the upcoming week, not to mention any headline related to the trade war.

In Australia, attention will center on the RBA’s monetary policy meeting next Tuesday. The central bank is expected to maintain the status quo, leaving rates unchanged this time, but maintaining the dovish stance. Throughout the week, the country will release PMI figures, and more relevantly, Q2 GDP, seen at 0.5% vs. the previous 0.4%.

AUD/USD Technical Outlook

The AUD/USD pair is trading little changed weekly basis, posting a lower low for a third consecutive week. Technical readings support further declines ahead, as the pair is developing well below all of its moving averages, with the 20 SMA heading firmly lower at around 0.6925, while technical indicators head marginally lower within negative levels, although with limited downward strength.

In the daily chart, a firmly bearish 20 DMA capped advances, currently offering an immediate resistance at around 0.6760. The Momentum indicator in the mentioned chart have recovered within negative levels, rather reflecting Friday’s bounce than anticipating additional gains ahead, while the RSI consolidates at around 37, all of which keeps the risk skewed to the downside. A steeper decline is likely on a break below 0.6676, the low set this August.

 AUD/USD sentiment poll

The FXStreet Forecast Poll shows that speculative interest is still unclear on whether the current dollar’s recovery could continue in the longer term, as the AUD/USD pair is seen falling next week, but bouncing afterward. It seems that it is more related to investors hesitating about the greenback’s strength than to the Aussie’s weakness.

Bears account for the 63% polled experts in the weekly perspective, with nobody looking to buy the pair. Monthly basis, bulls are up to 55%, decreasing to 40% in the quarterly perspective. The Overview chart shows that on average, the pair is seen at 0.6800, although the moving averages heading lower suggest that the market is not ready to push the AUD higher.

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