|

AUD/USD Forecast: upward move faded at critical resistance area

  • AUD/USD sentiment leans to the upside, but lower targets ahead left the average targets unchanged.
  • Australian employment figures the most relevant release for the week.

The AUD/USD pair soared to its highest in six weeks, but trimmed most of its weekly gains and settled a handful of pips below the 0.7600 threshold. Aussie's rally was backed by the strong momentum in worldwide equities that prevailed for most of the week, but the reversal in indexes, into negative territory as the G7 summit kicked in this Friday pushed it lower.

The Reserve Bank of Australia had its monthly monetary policy this past week, leaving the cash rate at a record low of 1.5% for the 22nd consecutive month. The accompanying statement repeated that "the low level of interest rates is continuing to support the Australian economy," while progress toward reducing unemployment and having inflation return to its target will likely to be gradual.

A positive surprise that actually helped the pair reach its weekly high of 0.7676 came from a nice bounce in retail sales, up in April 0.4% after the previous disappointing figure, and a solid GDP reading for Q1, with the economy growing 1.0% in the three months to March leading to a 3.1% annual increase. The strong reading was attributed to a steep increase in mining and government spending, although on a down note, household consumption remained weak,  up by just 0.3% in the quarter, which means that inflation will likely remain subdued by longer.

Early Friday, China released its May trade balance figures, showing a whopping 26.0% increase in imports in dollar terms, with increases in iron ore and copper imports, which should had offered some support to the Aussie, but didn't, as investors rushed away from high-yielding assets as political turmoil is expected during the weekend and in the G7 meeting, and ahead of next big first-tier events.

Beyond Fed and ECB's meeting, with the first bringing quite some noise to the pair, Australia will release  May employment data. The economy is expected to add 18.0K new jobs, the unemployment rate is expected to decline to 5.5%. Fulltime jobs increased by 32.K in the previous month, while part-time jobs decreased by 10K, usually understood as a positive sign.

AUD/USD technical outlook

Anyway, the AUD/USD pair has advanced up to the 61.8% retracement of its April/May slump at around 0.7655, before easing, indicating that the market may not be fully ready for a bullish breakout. Friday's decline, on the other hand, was contained by buyers around the 38.2% retracement of the same decline at 0.7565, now turned into a strong and immediate support for next week.

Technically, the weekly chart shows that after weeks of consolidation the pair decided to break higher, but also that the rally was rejected from a major resistance area, as around the highs and beyond the mentioned Fibonacci resistance, the pair has the 100 and 200 SMA. Technical indicators in the mentioned chart have recovered further but remain below their midlines and with the upward potential well-limited. In the daily chart, the upside was contained by a bearish 100 SMA but held above a mild bullish 20 SMA. Technical indicators in this last time frame have turned south, now resting above their midlines.

A break below 0.7565 will increase the downward potential of the pair, with 0.7470 being the next relevant support ahead of 0.7410, the low set last May. Resistances come at 0.7620 and the 0.7660 region, while beyond this last, there's room for a full 100% retracement up to 0.7810.

AUD/USD sentiment poll

The FXStreet Forecast poll paints a mixed picture for this next three months, as sentiment is bearish in the three-time frames under study, much clearer than the mixed view from last week. Nevertheless, the average targets are slightly below previous ones, with 0.7532 now in the three-month view, from 0.7548 just a week before. Even more interesting, the Overview chart shows that the moving average start trending higher after a period of consolidation, and while in the monthly perspective the pair is seen below the current area, the longer term perspective shows that bulls have clearly taken the lead, with most targets accumulating at 0.7700.

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.

More from Valeria Bednarik
Share:

Editor's Picks

AUD/USD climbs toward 0.7000 after strong China data dump

AUD/USD attracts follow-through buyers for the second straight day on Monday, extending last week's recovery toward 0.7000 in Monday's Asian trading. Strong Chniese Q3 GDP and activity data for September strengthen the pair's advance, following RBA Assistant Governor Chris Kent's hawkish remarks.

USD/JPY struggles near 158.00 amid hawkish BoJ, subdued USD

USD/JPY remains defensive near 158.00 in the Asian session on Monday, as the US Dollar remains depressed near a two-week low amid the recent decline in US bond yields. Furthermore, looming intervention risks underpin the Japanese Yen and weigh on the pair amid BoJ Governor Kazuo Ueda's hawkish remarks. However, Fed rate-hike bets and geopolitical uncertainties could limit USD losses and the major.

Gold stalls below $4,200 as Fed rate-hike bets limit upside

Gold (XAU/USD) struggles after opening the week higher. The US Dollar (USD) and US Treasury yields find some footing following last week’s pullback as traders assess the Federal Reserve’s (Fed) interest rate path and geopolitical developments.

Crypto Today: Bitcoin, Ethereum, XRP extend recovery despite ETFs outflows

Bitcoin edges higher above $82,000, building strong structural support despite roughly $229 million in ETF outflows last week. Ethereum recovers above $2,400 as bulls strive to regain trend control, backed by a subtle recovery in momentum indicators.

Higher than expected inflation shakes markets: What to prepare for?

US CPI report came in stronger than expected, lifting the probability of a December rate hike higher once again. Even though Fed Chair Warsh reinforced expectations of a hold for the October’s meeting, markets now face a two-step event: a likely pause on October 28, followed by an interest rate hike on December 9.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff
Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.