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AUD/USD Forecast: uncertainty reigns, range persists

  • AUD/USD seen advancing modestly next week, but a large number of bears remain around waiting for their chance.
  • RBA expected to remain on hold, Chinese trade balance data more relevant this week.

The AUD/USD pair is closing its fourth consecutive week little changed, with little macroeconomic hints coming from Australia, and the pair moving at the pace of risk sentiment through equities. Despite the back and forths in commodities, both gold and oil are closing the week with mild losses, adding pressure on the Aussie. However, Chinese figures released this week were quite encouraging, as the official manufacturing PMI for May showed steady growth in the world's second-largest economy, printing 51.9 vs. the expected 51.3, while the non-manufacturing index also beat market's forecast with 54.9.

In the US, inflation and employment figures were out these last days, both in-line with what the market already knew: the jobs' sector is healthy, and inflation moves slightly higher. None of them was a shocker, of a game changer for the Federal Reserve.

The upcoming week will be quite more interesting, as both Australia and China will release multiple first-tier readings, including the RBA monthly monetary policy meeting next Tuesday. The central bank is largely expected to maintain rates at record lows, and reiterate that, while is not yet the time, the next movement will probably be up.

Tensions between the US and China were revived after US President Trump said that he was not "satisfied" with the ongoing negotiations, and for sure, will continue to be a drag for the pair, as China is the major trade partner of the mining-based Australian economy. China will release its trade figures next Friday, with imports and exports expected to have decreased sharply in May.  

Beyond Chinese trade figures, little surprises could be expected this upcoming week from the macroeconomic front. Geopolitical jitters will probably remain the main market motor.  

AUD/USD technical outlook

The AUD/USD pair seems comfortable around the current 0.7550 region, and this latest consolidative stage suggests that an interim bottom could be developing at the 0.7411 yearly low set last May. However, the weekly chart maintains the risk leaned to the downside, as the pair is developing below all of its moving averages, while technical indicators remain within negative levels, lacking directional strength. The daily chart reflects the ongoing absence of directional strength, as the moving averages are confined to a 50 pips' range with the price now inside such range. Technical indicators lost upward strength, but the Momentum remains within positive territory and the RSI turned flat around 47, favoring a decline without confirming it. The 23.6% retracement of the latest weekly decline is the immediate support, although the pair would need to break below 0.7470 to turn bearish, aiming then to retest the mentioned yearly low. 0.7565, the 38.2% retracement is the immediate resistance, followed by the 50% retracement at 0.7620. The pair would have more chances of turning bullish on a break above this last.

AUD/USD sentiment poll

Sentiment toward the pair according to the FXStreet Forecast Poll is mixed, as the pair is seen up weekly basis and down in the monthly view, although in both cases still stuck around the 0.7500 level. Last week, bulls dominated the longer term view with 41% but now have decreased to 38%, matching the number of bears and leaving a neutral stance in the longer run. The overview chart shows that the downward sentiment has eased, but didn't reverse, at least yet. Indeed, the downside seems limited after the pair's recovery from 0.7411 but given that sellers continue defending 0.7600, bulls are losing interest.

Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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