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AUD/USD Forecast: unsustainable rally to continue only with a trade deal

  • Trade tensions between the US and China will finally take their toll on the pair.
  • Chinese trade figures and Australian inflation taking center stage.
  • AUD/USD bullish case backed by sentiment, critical resistance at around 0.6900.

The AUD/USD pair is closing the week with gains, despite there were not enough good news in Australia, neither in the trade war front. The FX market was all about the American dollar and its weakness, triggered by the market’s disappointment. The US and China had continued to report “progress” in talks, and US President Trump tweeted things are going “well.” But words fell short of convincing speculative interest, mainly considering the next round of tariffs on Chinese goods should come into effect next December 15.

Still, is not only about the US and China. These last days, US President Trump announced levies on base metals coming from Brazil and Argentina and menaced to impose tariffs of 100% on up to $2.4B worth of French goods.

Would or would not be a trade deal next week? Well, if there isn’t, risk aversion will keep on leading the way, but the dollar’s safe-haven condition will likely continue to be ignored. Still, if tensions mount between the two world’s largest economies, the Australian economy will also suffer. The AUD/USD pair won’t be able to rally just on the broad dollar’s weakness.

A better-than-expected US employment report didn’t help the greenback at the end of the week, as soaring Wall Street offset its effect on the pair.

Australian data not helping, could Chinese numbers do the job?

Equities collapsed throughout the first half of the week, recovering just marginally at the end of it, but the Aussie remained strong. The RBA had a monetary policy meeting on Tuesday, and as expected, policymakers left the main rate on hold at a record low of 0.75%. Governor Lowe was more confident than anticipated, saying that the housing market is responding to the latest rate cuts, an encouraging comment that kept the local currency underpinned. The enthusiasm faded the next day, when the country released Q3 GDP figures, as the economy grew by 0.4% in the three months to September, missing the market’s expectations and below the previous.

In the meantime, China will report its November trade figures, which could trigger some weekly opening gaps, as the numbers will be out on Sunday. On Tuesday, the country will release November inflation figures, while Australia will release the NAB’s Business Confidence Index, foreseen at 0 from 2 in the previous month. The most relevant figure coming from the country will be December Consumer Inflation Expectations, to be out on Thursday.

AUD/USD Technical Outlook

The weekly chart for the AUD/USD pair shows that it is finishing the week above its 20 SMA in the 0.6840 price zone, a few pips below its weekly high and the 61.8% retracement of its latest slump at 0.6865, the immediate resistance. Technical indicators in the mentioned chart head north, the Momentum about its 100 level an at levels last seen in February, but the RSI still below its mid-line. The risk is skewed to the upside, but the pair would need to clear the mentioned resistance, to extend gains toward the 0.6900/30 price zone.

In the daily chart, the pair is offering a neutral-to-bullish stance, as technical indicators hold within positive levels, but lacking the strength needed to confirm a bullish continuation. In this last time-frame, the 20 and 100 DMA converge with bearish slopes at around 0.6810. Below this last, the pair has a strong support at around 0.6770, with the bearish case becoming firmer with a break below this last

AUD/USD sentiment poll

The FXStreet Forecast Poll indicates that speculative interest continues favoring the Aussie against its American rival, as the pair is seen bullish or neutral in the next three months.  In the three time-frame under study, the pair is seen on average around 0.6850, although the Overview chart is painting a different picture as all of the moving averages recovered their upward slopes, clearer in the monthly perspective.

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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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