AUD/USD Forecast: trade war to keep limiting the upside

• Soft Australian data and central bank's divergences add to Aussie woes.
• AUD/USD to remain under pressure according to market' s sentiment, despite no love for the USD.

It was quite a dull week for the Aussie, with the AUD/USD pair poised to close it little changed around 0.7400 and posting a third consecutive lower low weekly basis, hitting these last days a fresh yearly low of 0.7310. Worse-than-expected US data has pushed it into negative territory this Friday, but selling interest capped the advance in the key 0.7440/50 price zone. Despite holding nearby, the pair seems to have little chances of posting solid gains as the Aussie is quite sensitive to Chinese woes, as it's the main consumer of Australian mining resources. The escalating trade war, with reciprocal tariffs between the US and China coming into effect this Friday, will likely keep limiting Aussie gains, and even in the case of dollar's weakness, the pair could remain subdued.

In the data front, the RBA met this past week, and as largely anticipated, left rates unchanged at record lows of 1.5%, and while Gov. Lowe reiterated that they believe that global economic expansion continues, he also added that "one uncertainty regarding the global outlook stems from the direction of international trade policy in the United States." The other big concern of the RBA keeps being household consumption, as wages' growth in the country remains slow. With no inflationary pressures and the housing sector subdued, a rate hike seems unlikely in Australia at least until 2020.

Data released in Australia was quite disappointing as Building Permits plunged 3.2% in May, following a 5.6% decline in April, while inflation expectations, according to the TD Security Inflation report remained unchanged from June, and up by 2.0% yearly basis, below the previous 2.1%. On a positive note, retail sales in the country were above expected, but in regards to economic growth, the services sector was the only one that expanded in June for more than in May.

This upcoming week, the country will release the NAB's business confidence index, and some housing data, but more relevant, China will offer the latest trade balance figures, which directly affect the Aussie.

AUD/USD technical outlook

In the weekly chart, the AUD/USD pair continues developing below all of its moving averages and with the 20 SMA,  crossing below the larger ones, while technical indicators continue to lack directional strength within negative levels, indicating a limited upward potential. Daily basis, however, the upside seems a bit more constructive, as the pair has settled above a bearish 20 DMA, while technical indicators head north above their midlines and at their highest in over a month. In the same chart, the 100 and 200 DMA maintain strong bearish slopes well above the current level, somehow suggesting that despite the advance could continue, the pair is far from long-term bullish.

The pair has a relevant static resistance in the 0.7440/50 level and would need to clearly break it to attract bulls. Next resistances above it came at the 0.7560/70 region, followed by 0.7640. To the downside, an immediate short-term support comes at 0.7360 followed by the yearly low of 0.7310. Below this last, a major static support at 0.7250 becomes then a possible bearish target.

AUD/USD sentiment poll

Sentiment toward the Aussie favors the downside, as according to the FXStreet Forecast Poll, seen down weekly basis, as bears account for a 56%, beating the bullish sentiment from last week, although the average target has been lifted by some 20 pips to 0.7404. Bulls are still a majority in the monthly view, but decreased from 74% to 60%, while in the quarterly view, bears are now leading the way, up to 52%. However, in this last perspective, the range of possible targets is extremely wide. The overview chart shows that the largest number accumulate below the current level, at around 0.72/73, with the moving average maintaining its bearish slope.

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