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

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.