AUD/USD Forecast: tied to Chinese woes

  • AUD/USD directionless for a fourth consecutive week, sellers strong on spikes above 0.7400.
  • Chinese growth figures and trade war jitters to set the tone next week.
  • The FX Poll shows a bearish tendency in the next week, month, and quarter. 

The AUD/USD traded uneventfully for a fourth consecutive week around the 0.7400 figure, with a spike up to 0.7483 being quickly reverted. The Aussie followed the swings of equities and base metals, up at the beginning of the week, but down after fresh trade war-related headlines mid-week.  Escalating tensions between China and the US affect the Australian economy, as it depends mostly on its exports of base metals to the first. The currency, however, bears pretty well with copper, silver prices plummeting to fresh yearly lows.

There were no relevant Australian data releases these last few days, but Chinese one this Friday weighed on the commodity-linked currency, as despite the trade balance posted a larger-than-expected surplus, imports, in dollar terms  missed expectations, up by just 14.1%, while exports rose beyond expected, up by 11.3%, leading to Chinese trade surplus with the US to a record high. Such surplus is the result of exporters rushing shipments before tariffs came into effect on July 6th.  Anyway, softer imports undermined the Aussie.

The most relevant event this week will be the release of the RBA Meeting Minutes from the June meeting. In the previous Minutes, the ones for May's meeting, the central bank removed the reference to the next rate move being "up, rather than down" triggering some alerts although, in a speech later in the month, Lowe reiterated the phrase, cooling down concerns. Anyway, the central bank kept the main benchmark at record lows, and investors will be looking for hints on whether the phrase remains out, and how concerned policymakers are about the effects of US protectionism measures on global economic growth.

Next Monday, China will offer its latest Retail Sales and Industrial Production figures, alongside with Q2 GDP, expected up 1.6% QoQ and 6.7% YoY. Signs of slowing growth in China will likely hit the Aussie, but trade war effects on equities will keep setting the tone for the pair.

AUD/USD technical outlook

The weekly chart shows that the risk remains skewed to the downside for the AUD/USD pair, as it settled below the 0.7400 level,  also below all of its moving averages, and with the shortest accelerating south below the larger ones. Technical indicators in the mentioned chart hold within the negative territory, with the Momentum heading nowhere, but the RSI heading lower around 35, supporting the downward bias.

In the daily chart, the price is stuck around a flat 20 SMA, but below the larger ones, which maintain their bearish slopes well above the current level, as technical indicators diverge from each other but hold within neutral readings. The pair bottomed a couple of times daily basis in the 0.7340/50 region, now the immediate support, while this year low comes at 0.7310. Below it, the pair could test the 0.7250 level, a major static support area that if broken, could lead to a steeper decline toward 0.7000. Short-term resistances come at 0.7440 and 0.7490, this last the weekly high. Beyond it, the pair could recover up to 0.7600, should trade concerns eased further and the dollar loses its safe-haven condition. 

AUD/USD Sentiment

The FXStreet forex poll of experts shows a bearish tendency on all time frames. Moreover, experts' positions have shifted to the downside on both the medium and long terms. Some bulls have thrown the towel.

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